Man Handle pumping gasoline fuel nozzle to refuel. Vehicle fueling facility at petrol station. White car at gas station being filled with fuel. Transportation and ownership concept.

Key takeaways

  • The Consumer Price Index rose by 0.6% in August.
  • Year-over-year headline inflation came in at 3.7%, compared to the 3.2% reported last month.
  • Core inflation, which excludes the volatile food and energy categories, increased by 0.3% month-over-month.
  • The high cost of energy – particularly gasoline – and shelter were the primary drivers of elevated inflation.

The Bureau of Labor Statistics (BLS) published its Consumer Price Index (CPI) data for August.1 The CPI increased 0.6% month-over-month, bringing inflation to 3.7% year-over-year.

The heightened cost of gasoline

The energy category of the CPI posted a 5.6% increase. Within the energy category, gasoline prices spiked 10.6% month-over-month, accounting for more than 50% of the headline CPI uptick. 

“The hotter headline inflation print should not come as a surprise given the recent bubbling up in crude prices,” said Shawn Snyder, Global Investment Strategist for J.P. Morgan Wealth Management.

The current national average cost of a gallon of gasoline is $3.822, with the rising demand for oil and restricted supply influencing higher prices.

"The concern we have is not what higher energy prices might mean for inflation, but what they will mean for the consumer,” Snyder said. “Higher gasoline prices act as a direct tax on the consumer and this comes at a time when burdens are already rising in the form of student debt repayments and higher costs of credit. The August retail sales and September consumer sentiment reports set to be released later this week should hold some insights into how consumers are responding to higher energy costs.”

Other heightened CPI components

Other CPI index components contributing to higher inflation included food, which ticked up by 0.2%. Motor vehicle insurance also marched higher, rising 2.4% in August, which translates to a hefty 19.1% for the 12-month period. Medical care increased by 0.2% for the month after falling by the same amount in July.

Shelter also continued to be a primary driver of inflation. Core inflation, which excludes food and energy, primarily reflected the high cost of shelter.

Although the August report reveals some stubbornly high prices, the cost of energy in general and gasoline specifically have come down by more than 3% on an annual basis.

Will the Fed continue to raise rates? 

Rising costs in non-discretionary categories, such as shelter and medical care, along with a cooling in the labor market, may cause Americans to reduce their spending. This could in turn lend support to moderating inflation and less aggressive Federal Reserve interest rate hiking.

This CPI report comes on the heels of the August jobs report which revealed a 3.8% increase in unemployment – an 18 month high – as well as moderating wage growth. Signs of a softening labor market could support optimism that the Fed may retreat from its interest rate hiking cycle. While it’s widely assumed that Fed will skip an interest rate hike at the September 19-20 Federal Open Market Committee (FOMC) meeting, it’s up for debate whether they resume hikes in November.

"This [CPI] reading doesn’t solve the debate,” Snyder said. “While higher energy prices argue for one more rate hike at their November 1 Federal Open Market Committee (FOMC) meeting, the cooling labor market argues against. Until a clearer picture forms, the debate will likely continue with both the Fed and markets now data-dependent.”




Bureau of Labor Statistics, “Consumer Price Index” (September 13, 2023)


U.S. Energy Information Administration, “Gasoline and Diesel Fuel Update” (September 11, 2023)

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