A highly anticipated report released by the Labor Department on Tuesday showed an unexpected uptick in U.S. consumer prices in the month of August.
The Labor Department said its consumer price index inched up by 0.1 percent in August after coming in unchanged in July. Economists had expected consumer prices to edge down by 0.1 percent.
The modest increase in consumer prices came as higher prices for shelter, food and medical care offset another steep drop in gasoline prices.
A 10.6 percent plunge in gasoline prices contributed to a 5.0 percent slump in energy prices, while food prices increased by 0.8 percent.
The report showed prices for shelter and medical care also advanced by 0.7 percent and 0.8 percent, respectively.
Compared to the same month a year ago, consumer prices were up by 8.3 percent in August, reflecting a slowdown from the 8.5 percent spike in July. However, economists had expected the annual rate of growth to slow to 8.1 percent.
The report also showed core consumer prices, which exclude food and energy prices, climbed by 0.6 percent in August after rising by 0.3 percent in July. Core prices were expected to increase by another 0.3 percent.
The bigger than expected increase in core prices reflected higher prices for shelter, medical care, household furnishings and operations, new vehicles, motor vehicle insurance, and education.
The annual rate of growth by core consumer prices accelerated to 6.3 percent in August from 5.9 percent in July, while economists had expected the annual rate of growth to quicken to 6.1 percent.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said the faster than expected core price growth "confirms" that the Federal Reserve will raise interest rates by at least 75 basis points next week.
"There might be some late speculation that the Fed could even go for a 100bp hike although, with rates now close to neutral, we doubt that will happen," Ashworth said.
On Wednesday, the Labor Department is scheduled to release a separate report on producer price inflation in the month of August.
Producer prices are currently expected to edge down by 0.1 percent in August after falling by 0.5 percent in July, while the annual rate of growth is expected to slow to 8.8 percent from 9.8 percent.
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