US inflation holds at 3.4 percent in August: Fed under pressure ahead of rate decision

New inflation pressure from the United States is weighing on the interest rate outlook for the coming months. According to data from the U.S. Bureau of Labor Statistics, the U.S. inflation rate in August 2026 remained at 3.4 percent compared with the same month a year earlier. Although the 0.4 percent month-on-month rise in consumer prices was largely in line with expectations, the persistently high inflation is fueling market fears that the U.S. central bank, the Federal Reserve, will further raise its benchmark rates at its upcoming meeting.

Energy prices as the main driver of the monthly price increase

The main driver of the acceleration in month-on-month terms was energy prices, which rose by 2.1 percent in August. Higher gasoline prices in particular had a notable impact: they climbed 3.9 percent from the previous month and accounted for more than a third of the total monthly increase in overall inflation. The backdrop was rising crude oil prices, with Brent at times climbing back above the $100 per barrel mark amid geopolitical tensions.

Core inflation shows a mixed picture

Core inflation, which excludes volatile energy and food prices, posted a monthly increase of 0.3 percent in August after 0.2 percent in July. Year on year, however, the core rate eased slightly to 2.4 percent, the lowest level since March 2021. However, these signs of relief were not enough to fully dispel market participants' concerns about persistently tight monetary policy.

FedWatch indicator signals high probability of rate hike

Ahead of the upcoming interest rate decision by the Federal Open Market Committee on September 15 and 16, 2026, market expectations have shifted significantly. According to CME FedWatch data, the probability of a 25 basis point rate hike rose to just under 90 percent. The yield on 10-year U.S. Treasury bonds then remained in the area of 4.95 percent, keeping pressure on interest-rate-sensitive market segments.

Consequences for global investors and market sectors

For private investors, persistently high U.S. inflation means greater volatility in the stock markets. In particular, highly valued technology and growth stocks in the Nasdaq and S&P 500 are coming under valuation pressure, as higher interest rates reduce the present value of future earnings. At the same time, energy stocks are benefiting selectively from higher commodity prices, while the broader consumer sector could suffer from consumers' reduced real wages.

The inflation report places the U.S. central bank in a difficult balancing act immediately before its meeting. In the run-up to the rate decision, investors should keep an eye on defensive quality stocks and bonds with attractive yields, while technology stocks are likely to remain prone to short-term swings.