US consumer inflation picks up in August

US consumer prices accelerated in August as the cost of gasoline rebounded after two monthly declines in a row, bolstering financial market expectations that the Federal Reserve could raise interest rates next week.

The US Consumer Price Index increased 0.4% last month after edging up 0.1% in July, the Labor Department's Bureau of Labor Statistics said today. In the 12 months to August, consumer inflation advanced 3.4% after rising by the same margin in July.

Economists polled by Reuters had forecast the CPI increasing 0.4% over the month and climbing 3.4% year-on-year. Excluding the volatile food and energy components, the CPI rose 0.3% last month after gaining 0.2% in July.

The so-called core CPI increased 2.4% year-on-year in August after rising 2.5% in July.

The US Fed tracks the Personal Consumption Expenditures price indexes for its 2% inflation target.

The US government reported earlier this week an increase in the Producer Price Index in August, with strong rises in several key components that feed into the calculation of PCE inflation. That added to last week's robust employment report for August in boosting rate hike prospects next week.

The odds of a rate increase had diminished following comments by Fed Governor Christopher Waller at a Reuters NEXT Newsmaker event last week that he was inclined to argue in favour of keeping rates steady if data confirmed inflation pressures were cooling.

Oil prices climbed back above $100 a barrel yesterday, while diesel prices are at record highs, suggesting YS inflation was set to remain elevated and broaden out.

Some economists saw price pressures persisting because of tariffs on imports, most recently against Canada, one of the US top trade partners.

Frustration over higher prices, especially for gasoline and food, has led to a sharp erosion in President Donald Trump's approval ratings and could cost his Republican party control of the US Congress in the November midterm elections.