U.S. inflation picked up as gas prices marched higher due to conflict in the Middle East

U.S. Inflation picked up as gas rates.

Key points

• Job market rebounds as employers add 162, 000 jobs; the unemployment rate stayed at 4.1%.
• FILE – A person loads groceries in plastic bags into their vehicle, May 18, 2026, at a grocery store in Cincinnati.
• The consumer cost index rose 3.4% last month compared with a year ago, the Labor Department stated Friday, the same as in July.
• The Labor Department remarked Friday that the consumer rate index rose 3.4% last month compared with a year ago, the same as in July.
• But on a monthly basis, core rates rose 0.3% from July to August, the largest rise since April.

U.S. Inflation picked up as gas rates marched higher due to conflict in the Middle East. By: Christopher Rugaber, Associated Press – September 11, 2026.

FILE – A person loads groceries in plastic bags into their vehicle, May 18, 2026, at a grocery store in Cincinnati. (AP Photo/Joshua A. Bickel, File).

In practice, the Labor Department remarked Friday that the consumer rate index rose 3.4% last month compared with a year ago, the same as in July. As costs jumped 0.4% from July to August, up from an growth of just 0.1% the previous month, but on a monthly basis, inflation accelerated.

WASHINGTON (AP) – U.S. Inflation accelerated last month as gas rates spiked after renewed fighting in the Middle East, underscoring the affordability challenges that are top of mind for plenty of voters with midterm elections now just seven weeks away.

Meanwhile, the consumer cost index rose 3.4% last month compared with a year ago, the Labor Department stated Friday, the same as in July. As costs jumped 0.4% from July to August, up from an growth of just 0.1% the previous month, but on a monthly basis, inflation quickened.

For context, the figures show that inflation remains stubbornly elevated, more than five years after rates first soared as the economy emerged from the COVID pandemic. Persistent inflation has presented a major challenge for the inflation-fighters at the Federal Reserve and has soured plenty of voters on the Trump administration's economic track record.

Excluding the volatile food and energy categories, core rates were 2.4% higher in August than a year ago, down slightly from July's 2.5% and the third straight decline. But on a monthly basis, core rates rose 0.3% from July to August, the largest rise since April.

Notably, the larger-than-expected monthly growth in core costs will probable embolden those Fed office-holders who have pushed for the central bank to lift its benchmark interest rate at its session next week. Wall Street investors now see regarding 70% likelihood the Fed will rise rates Sept. 16, according to CME Fedwatch.

Notably, the Trump administration is seeking to counter voter reservations concerning high rates and rising interest rates as the midterm elections approach. President Donald Trump on Wednesday promised $5, 000 payments to every American adult if the GOP keeps a majority in Congress, a move that would require congressional approval and could stoke inflation. And Treasury Secretary Scott Bessent has stepped up buybacks of Treasury bonds in a bid to keep longer-term interest rates lower. Yet on Thursday the yield on the 10-year Treasury reached a almost three-year high.

Renewed fighting in the Middle East has pushed up energy costs, with the nationwide average cost of a gallon of gas on Friday jumping more than 7% from a month ago to $4.30.

Hotel room rates and airfares additionally rose last month while new and applied cars secured more expensive. Apparel and grocery rates were unchanged from July to August. Inflation as one-time shock, or something more.

Plenty of economists and Federal Reserve office-holders have long considered higher gas rates one of a number of "one-time" shocks that are lifting inflation, along with tariffs and surging investment in AI data centers. For months, the hope has been that as the war against Iran wound down, and the effects of tariffs faded, inflation would grind lower.

Yet there are few signs of the Iran war cooling, and even Trump has remarked gas costs won't retreat until after the midterm elections in November. And while Trump's trade fight with Canada will impact a small number of imports, it is a reminder that tariffs remain a threat that could push up other costs.

"This is not one and done, " remarked Kathy Bostjancic, chief economist at Nationwide. "It's unclear when tensions in the Middle East are going to settle down. This seems like it could be a prolonged disruption."

While core rates are rising more gradually than overall rates, more expensive oil and gas could spread through more of the economy. Pricier jet fuel will probable push up airfares, and more expensive diesel will raise shipping costs. It could produce groceries and other goods shipped by truck more expensive. On Thursday, a wholesale cost report demonstrated a jump in chemical rates, probable a result of more expensive oil. What will the Federal Reserve do?

Federal Reserve policymakers are split on whether to hike at a session next week, so much so that differences of a few hundredths of a percentage point in Friday's inflation report could determine whether the central bank boosts its benchmark interest rate or leaves it unchanged. The Fed, which is tasked with keeping inflation in check, typically lifts borrowing costs to slow spending and limit cost increases.

Investors and analysts differ over whether the Fed will hike rates at their Sept. 15-16 session. Chair Kevin Warsh suggested he was leaning toward a rate hike in a high-profile speech two weeks ago, but he did not commit to doing so at a specific time.

And last Thursday, Fed governor Christopher Waller, echoing some other Fed authorities, suggested that if Friday's inflation report indicates cost increases cooling, then he would backing keeping rates where they are. Waller is one of the 12 authorities who vote on each Fed rate decision.

Waller's heavy emphasis on August's figures has raised the stakes for Friday's report. If the monthly core figure rounds up to 0.3%, some Wall Street analysts expect the Fed would then hike rates. But if it rounded down to 0.2% or lower, then a hold could be more probable. If it is somewhere in between, it's not clear what the Fed may do. One analyst called such considerations "ludicrous precision."

For his part, Warsh doesn't want to tip his hand regarding his next moves. It some economists say will produce this kind of uncertainty more common before Fed meetings. Regarding the Author(s). Christopher Rugaber, Associated Press. Economy Christopher Rugaber, Associated Press September 10, 2026.

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For now, U.S. Inflation picked up as gas prices marched higher due to conflict remains the part of the story worth watching, and further updates are likely as more details are confirmed.