Rates ‘sure’ to rise as Fed fights inflation

By the Editorial Team · Saturday, September 12, 2026

The core Consumer Price Index in the U.S. increased by 0.3% in August, slightly exceeding expectations and raising the likelihood that the Federal Reserve will hike interest rates soon. This persistent inflation, driven in part by rising gasoline prices, suggests the Fed may pursue multiple rate increases to control price growth while balancing economic stability.

A key gauge of U.S. inflation rose modestly in August, increasing expectations that the Federal Reserve will raise interest rates at its upcoming policy meeting. The Bureau of Labor Statistics reported Friday that the core Consumer Price Index (CPI), which excludes more volatile food and energy costs, increased by 0.3% for the month, slightly above the 0.2% gain forecast by economists. Over the past year, the core CPI advanced 2.4%.

The overall CPI, which includes food and energy, climbed 0.4% in August and was up 3.4% year-over-year, remaining notably above the Fed’s 2% inflation target. The monthly and annual readings were consistent with analysts’ expectations and matched July’s pace.

Gasoline prices were a significant contributor to the persistence of inflationary pressures, rising 3.9% in August amid ongoing geopolitical tensions related to Iran. Over the last 12 months, gasoline prices have surged 27.4%, accounting for a substantial portion of the overall inflation rate.

“Consumer prices are moving in the wrong direction and remain significantly above the Federal Reserve’s target,” said Skyler Weinand, chief investment officer at Regan Capital. He added that the central bank is “all but assured” to increase rates next week and may pursue several additional hikes in the coming months to align short-term interest rates with market expectations.

The probability of a 25-basis-point Fed rate increase jumped to 85.6% on Friday, up from 72.4% the previous day and markedly higher than estimates from a month ago, according to data from CME FedWatch.

Following the inflation release, yields on short-term U.S. Treasury securities edged higher, while longer-term Treasury yields continued to rise, with the 10-year note approaching the 5% level. Despite concerns over inflation, U.S. stock markets rebounded after four consecutive days of losses. The Dow Jones Industrial Average gained 509 points, or 1%, while the S&P 500 and Nasdaq each rose nearly 1%. Nevertheless, all three indexes closed the week lower overall.

Oil prices eased on Friday, with Brent crude declining 3% to $104.61 a barrel, retreating from earlier highs above $109. Some analysts noted that the increase in cellphone plan costs during August added 0.1 percentage points to the core inflation figure, suggesting part of the rise in core CPI may stem from temporary factors.

The government’s inflation report underscores continuing challenges for the Fed as it seeks to curb price growth without destabilizing economic growth, with policy decisions expected to remain closely watched in the coming weeks.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.