US CPI rises 3.4% in August as gasoline prices jump

US consumer prices increased 0.4% in August after rising 0.1% in July, with annual inflation holding at 3.4%, the Bureau of Labor Statistics reported Friday. The monthly increase was driven in part by a sharp rise in gasoline prices.

The gasoline index rose 3.9% and accounted for more than one-third of the overall monthly CPI increase. Energy prices increased 2.1%, while shelter rose 0.3% and food increased 0.1%. Food away from home climbed 0.3%.

Core CPI increased 0.3% in August, following a 0.2% rise in July. Higher prices for communication, lodging away from home, airline fares, education and used cars and trucks contributed to the increase, while medical care and motor vehicle insurance declined.

Core inflation rose 2.4% over the 12 months through August, compared with a 2.5% increase through July. Energy prices were up 16.3% over the year, including a 27.4% increase in gasoline, while food prices increased 2.7%.

Grocery prices were unchanged in August, although eggs rose 2.9% and dairy products increased 0.3%. Fruits and vegetables fell 0.4%, while the index for food away from home rose 3.4% over the year.

Bitcoin dropped to about $76,000 following the CPI release before quickly recovering. The token has since climbed back above $78,000, gaining 1.5% in the past 24 hours.

The inflation report added to expectations that the Federal Reserve may raise interest rates at its September 15-16 policy meeting. It came after August producer prices rose sharply, with several components that feed into the Personal Consumption Expenditures price indexes showing strong gains.

The PCE indexes are used by the Fed to gauge inflation against its 2% target, while a stronger-than-expected August jobs report also lifted expectations for a rate hike.

Financial markets were pricing in roughly a 70% chance of a 25-basis-point rate hike at the Fed’s upcoming meeting, according to CME’s FedWatch tool. The Fed’s benchmark overnight rate currently stands at 3.50%-3.75%.