US annual inflation in August unchanged at 3.4%, in line with forecasts

US annual inflation remained at 3.4% in August, unchanged from July and in line with economists' forecasts. Core inflation rose 2.4% year-over-year, down from 2.5% in July. The data comes ahead of the Federal Reserve's interest rate decision next week, with the market pricing in about a 71% probability of a rate hike, supported by a strong jobs report and rising energy prices.

US annual inflation remained unchanged in August at 3.4%, matching economists' expectations. On a monthly basis, prices rose 0.4%. Core inflation, which excludes food and energy, increased at an annual rate of 2.4%, compared to 2.5% in July. The data is released just days before the Federal Reserve's interest rate decision next week. The market is pricing in about a 71% probability of a rate hike, supported by the surprisingly strong August jobs report, which added 162,000 jobs—three times expectations. Tensions with Iran in the Strait of Hormuz, driving up energy prices, also support rate hike expectations. The yield on the 10-year US Treasury note is at its highest since 2007, near 5%. The chief economist at Natixis CIB Americas noted that a reading in line with forecasts would mark a fourth consecutive month of encouraging inflation data and ease pressure for a rate hike. Conversely, if inflation comes in higher than expected, he expects a rate hike next week.