US CPI rose at an accelerated pace in August, quickly heating up market expectations for interest rate hikes.

Gasoline prices rebounding after two consecutive months of declines, U.S. consumer prices accelerated in August, boosting financial market expectations that the Federal Reserve may raise interest rates next week. The U.S. Bureau of Labor Statistics said Friday that the Consumer Price Index (CPI) rose 0.4% month-on-month in August, following a 0.1% increase in July. Consumer inflation rose 3.4% in the 12 months ending August, matching the July gain. August’s seasonally adjusted core CPI rose 0.3% month-on-month, exceeding the market forecast of 0.2%. Data released Thursday showed the Producer Price Index (PPI) rose in August, with several key components posting strong gains—components that feed into calculations for Personal Consumption Expenditures (PCE) inflation. Combined with last week’s strong August jobs report, this has further lifted market expectations for a rate hike next week. Following the release of August’s CPI data, markets are pricing in roughly a 90% probability that the Fed will raise rates next week. Some economists argue that price pressures will persist due to import tariffs—most recently those imposed on Canada, one of the U.S.’s largest trading partners. Discontent over rising prices, particularly gasoline and food costs, has led to a sharp drop in Trump’s approval rating and could cost his Republican Party control of Congress in the November midterm elections. Fed Chair Walsh said last month that if policymakers fail to gain sufficient confidence that inflation is moving back toward the 2% target, the Fed still “has work to do.”