Higher gas prices likely pushed up inflation in August, though other costs probably slowed

WASHINGTON (AP) — A sharp increase in gas prices likely pushed inflation higher in August compared with a year ago, yet a measure excluding energy and food costs is expected to fall for the fifth straight month, suggesting that the Federal Reserve's interest rate hikes are still bringing down prices for many goods and services.

The consumer price index is projected to have increased 3.6% last month from a year earlier, according to economists' forecasts compiled by data provider FactSet. The increase would be up from 3.2% in July, though still far below the peak of 9.1% in June 2022.

Yet core prices, which exclude food and energy and are monitored closely by the Federal Reserve, are likely to cool to 4.3% in August from a year ago, down from a 4.7% annual pace in July. The Fed follows core prices because they can provide a better read on where inflation is headed.

If the forecasts are accurate, such data will likely fuel optimism that inflation is coming under control, despite the rise in gas prices, and raise the odds the Fed will skip an interest rate hike at its meeting next week. While more expensive gas could elevate inflation this month as well, most economists forecast that inflation will decline through the end of the year as the cost of new and used cars, rents, and furniture decline.