US consumer inflation held at 3.4% in August as energy costs rose after Iran tensions

US consumer prices in August produced an annual inflation rate of 3.4%, unchanged from July, the US Bureau of Labor Statistics reported on Friday.

Energy costs were the largest contributor to monthly price gains: gasoline rose 27.4% year-over-year and accounted for more than one-third of the overall monthly increase; heating fuel increased 52% annually. Average pump gasoline was $4.29 per gallon, $1.10 above the prior year, and diesel topped $6 per gallon on Friday for the first time.

Core inflation, which excludes energy and food, increased 0.3% month-over-month and 2.4% year-over-year. Grocery categories such as meat, poultry, eggs and dairy rose modestly between 0.1% and 0.3%, while lettuce prices continued to decline.

The rise in energy prices followed the end of the ceasefire between the US and Iran and coincided with higher global oil benchmarks: Brent crude surpassed $108 a barrel on Friday, its highest since May.

The report increases pressure on the Federal Reserve ahead of its meeting next week, as persistent headline inflation and rising core inflation weigh on the case for a rate decision. At the July Federal Open Market Committee meeting the board voted 9–3 to hold rates; Fed officials including Governor Christopher Waller have cited considerable uncertainty from geopolitical and technological factors and signalled they could raise rates if inflation remains hot.