Washington, Sept. 12 (SANA)US consumer prices accelerated in August as gasoline and other fuel costs surged, strengthening expectations that the Federal Reserve will raise interest rates at its policy meeting next week.

The Consumer Price Index rose according to Reuters 0.4% from July, when it increased 0.1%, while annual inflation remained at 3.4%, in line with economists’ forecasts, the Labor Department’s Bureau of Labor Statistics said. Official data showed that core prices, excluding food and energy, increased 0.3%—their biggest monthly rise since April—and were up 2.4% from a year earlier.

Markets put the likelihood of a quarter-percentage-point rate increase at about 87%, up from 72% before the inflation report. The Fed’s benchmark rate currently stands between 3.50% and 3.75%.

Economists said persistent inflation, alongside signs of renewed labor-market strength, could prompt the Fed to raise rates next week and possibly again in October or December. Inflation remains above the central bank’s 2% target.

Energy prices drove much of the monthly increase. Gasoline rose 3.9%, accounting for more than a third of the CPI gain, while other motor fuels, including diesel, surged 9.6% and were 44% higher than a year earlier. Oil climbed above $100 a barrel during the week, while the national average diesel price exceeded $6 a gallon for the first time.

Analysts warned that the continuing Iran war could spread energy-related pressures throughout the economy through higher transportation and production costs. They also cited spending on artificial intelligence infrastructure as another potential source of inflation.

Food prices offered limited relief, rising just 0.1% for a second month. Grocery prices were unchanged, while fruit and vegetable prices declined 0.4%, partly because lettuce prices fell 6.2%. However, eggs rose 2.9%, and dairy products and non-alcoholic beverages also became more expensive.

Food prices increased 2.7% annually, while inflation continued to outpace wages. Inflation-adjusted average hourly earnings fell 0.3% from a year earlier, marking a fifth consecutive month of declining real wage growth.

Among core components, mobile phone costs surged 5.9%, airline fares rose 2.7% amid higher jet fuel prices, and hotel and motel rates rebounded 2.4%. Rents increased 0.2%, while healthcare costs eased and motor vehicle insurance fell 0.8%. Prices of new and used vehicles rose, but prescription medicine prices were unchanged.

The relatively modest increase in core goods prices suggested that the inflationary impact of import tariffs was fading, although escalating US-Canada trade tensions remained a potential risk.

Economists estimated that the Fed’s preferred core Personal Consumption Expenditures inflation measure rose 0.3% in August and 3.4% annually, up from 3.3% in July. The calculation will include methodological changes.

The higher cost of living has weighed on President Donald Trump’s approval ratings ahead of November’s congressional elections. Consumer sentiment fell to 47.8 in early September from 51.7 in August, with both Democratic and Republican respondents reporting weaker confidence and expecting higher inflation.

Trump has continued pressing the Fed to cut rates, while Fed Chair Kevin Warsh has said policymakers will have “work to do” unless they gain confidence that inflation is moving toward the 2% target.

US stocks rose as oil prices retreated, though crude remained on course for a weekly gain exceeding 8%. The dollar was little changed, while the 10-year Treasury yield briefly climbed to 4.9915% before easing to 4.92%. The Associated Press reported that expectations of a rate increase strengthened across bond markets.