Inflation posted its biggest monthly rise this year in August as consumers faced higher prices for energy and a range of other items.

The consumer price index, which measures the cost of a wide range of goods and services, rose a seasonally adjusted 0.6% for the month, up 3.7% from a year ago, the U.S. Labor Department reported Wednesday. Economists surveyed by Dow Jones expected increases of 0.6% and 3.6%, respectively. The two figures rose 0.2% and 3.2%, respectively, in July.

However, excluding fluctuating food and energy prices, core CPI rose 0.3% and 4.3%, respectively, compared to estimates of 0.2% and 4.3%, respectively. Federal Reserve officials are focusing more on the core currency because it provides a better indication of where inflation will head in the long term. The core rose 0.2% and 4.7%, respectively, in July.

Energy prices were a key contributor to the increase, rising 5.6% month-over-month, an increase that included a 10.6% increase in gasoline.

Food prices rose 0.2% while the cost of accommodation, which accounts for about a third of the CPI weight, rose 0.3%. Within accommodation, the rental index for the primary residence increased by 0.5% and was up 7.8% compared to the previous year. Owner-equivalent rent, a key metric that measures what homeowners think they could get in rent, rose 0.4% and 7.3%, respectively.

Elsewhere in the report, airfares rose 4.9% but were still 13.3% below last year. Used car prices, which were a major contributor to inflation during their rise in 2021 and 2022, fell 1.2% and are down 6.6% year-on-year. Transportation services increased 2% month-over-month.

Lisa Sturtevant, chief economist at Bright MLS, said excluding the protection from the consumer price index would have resulted in an annual increase of only about 1%.

“Housing continues to contribute an outsized share of inflation measures,” Sturtevant said. “Rent growth has slowed significantly and average rents fell year-on-year across the country in August. … However, it will take months for these aggregate rental trends to be reflected in the CPI readings, which the Fed must take into account when calculating “at its meeting … later this month its “data-driven” approach to deciding the to present interest rate policy.”

Stock market futures initially fell after the report and then recovered. Government bond yields were consistently higher.

The rise in headline inflation had a negative impact on workers’ salaries. Real average hourly wages fell 0.5% this month, although they were still up 0.5% from a year ago, the Labor Department said in a separate news release.

The data comes as Federal Reserve officials look for a longer-term approach to solving the inflation problem.

In a series of hikes that began in March 2022, the central bank raised its key interest rate by 5.25 percentage points to combat inflation, which was at a more than 40-year high in the summer of 2022.

Recent comments from officials suggest a more cautious approach. While policymakers had preferred to overdo monetary tightening, they are now taking a more balanced view of the risks and appear to be more cautious about future rate hikes.

“Overall, there is nothing here that could change the Fed’s plans to keep interest rates unchanged next week.” [Federal Open Market Committee] meeting,” wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics.

Markets largely expect the Fed to forego a rate hike at next week’s meeting. Additionally, futures prices have been volatile, with traders estimating about a 40% chance of a final advance in November, according to data from CME Group.

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