US consumers faced more high prices in August as Iran war raised energy costs

Consumer sentiment dropped to record lows earlier this summer as Americans said they were struggling to afford gas and groceries. Photograph: Brandon Bell/Getty ImagesView image in fullscreenConsumer sentiment dropped to record lows earlier this summer as Americans said they were struggling to afford gas and groceries. Photograph: Brandon Bell/Getty ImagesInflationUS consumers faced more high prices in August as Iran war raised energy costsAnnualized inflation rate was 3.4%, same as July, and core inflation, which omits energy and food prices, rose to 2.4%

US consumer prices remained stubbornly high in August as the end of the ceasefire between the US and Iran pushed energy prices up, according to data from the US Bureau of Labor Statistics released on Friday.

The annualized inflation rate was 3.4%, the same as it was in July. The most recent peak was seen in May, when the inflation rate hit a three-year high at 4.2%. Core inflation, which strips out volatile energy and food prices, increased 0.3% from the month before and 2.4% annually.

Gasoline increased 27.4% compared with the year before, accounting for more than one-third of the overall monthly increase in prices. Fuel , which is used to power and heat homes, increased annually at a staggering 52%.

Prices of common grocery store essentials, such as meat, poultry, eggs and dairy, increased slightly, from 0.1% to 0.3%. Lettuce prices continued to fall, probably continued fallout from the cyclosporiasis outbreak.

Despite dipping from its most recent peak, inflation remained above levels that were seen before the war in Iran, largely because of higher energy prices. On Friday, the cost of diesel, used for trucks, buses and trains, rose past $6 a gallon for the first time ever. Brent crude, the international benchmark for oil prices, also surpassed $108 on Friday, its highest level since May. Meanwhile, gas prices at the pump sat at an average of $4.29 a gallon, $1.10 higher than the average a year ago, according to AAA.

It’s a worrying sign for Republicans, who are on the ballot at a time when consumer sentiment has hit record lows and Americans say they are struggling to afford gas and groceries. Concerns over inflation have also bled into the US bond market, where the yields on some US treasurys have reached their highest points since the 2008 recession. Yet it’s unclear when relief will come.

The White House is aware of what this could mean for the upcoming elections. On Wednesday night, Trump said Americans would get a $5,000 “dividend” if Republicans win a majority in the midterms, which critics said was akin to bribery.

One of the most direct ways the federal government can affect prices comes from the power of the US Federal Reserve, which sets the interest rates that have an effect on the price of loans, including mortgages, car payments and student debt.

With prices remaining stubbornly high and core inflation rising, Friday’s report bolsters the likelihood that the Fed will vote to increase rates at its board meeting next week.. Either move could have heavy implications for the US economy.

But pressure to increase rates has been growing. At the Fed’s last board meeting in July, it voted 9-3 to maintain rates – the first time in a decade that three board members shared dissent over a policy decision.

Historically, raising interest rates helps to lower inflation – making investments more expensive slows the economy. Inflation reached 9.1%, a 40-year high, in 2022. After the Fed spent the next few years increasing interest rates, up to a range of 5.25%-5.5%, inflation went down to 2.3% in April 2025.