U.S. inflation accelerated in August, with producer prices rising slightly more than economists had expected, Bureau of Labor Statistics data showed. The report also shifted market pricing toward additional Federal Reserve tightening, while Treasury yields moved higher.
The Producer Price Index increased 5.4% from a year earlier, above the 5.3% forecast. July’s annual increase was revised to 4.8%, compared with the initially reported 4.7%.
Underlying price pressure also strengthened. Excluding food and energy, producer prices advanced 4.6% year over year, in line with expectations. The prior month’s core reading was revised to 4.3% from 4.2%.
On a month-to-month basis, headline producer prices rose 0.4%. Core PPI increased 0.2%.
The August advance was largely tied to energy. Prices for final-demand energy climbed 4.2%, while diesel fuel surged 24.1%. The diesel increase accounted for more than one-third of the rise in goods prices, according to the data.
Overall goods prices gained 1.1% in August. Services prices were nearly flat, rising 0.1%, though transportation and warehousing costs increased 2.3%.
A separate measure that removes food, energy and trade services rose 0.3% for the month. Over the past year, that gauge increased 4.7%.
After the data, fed funds futures indicated a 76% probability of a rate increase next Wednesday. The CME FedWatch Toll pointed to a 70% chance for a hike in this month and 56% in October.
Treasury yields climbed following the release. The 30-year yield moved above 5.34%, erasing the drop linked to Bessent’s intervention. The 10-year yield rose to 4.9%, its highest level since November 2023, while the 2-year yield moved above 4.5%, reaching levels last seen in July 2024.
