Inflation
Written October 1, before the latest CPI inflation and producer prices. The numbers and charts on this page are current; figures in the text may not be.
Inflation ticked up in August, and the Fed has raised rates.
CPI inflation rose to 3.35% in August from 3.3% in July, still below the 4.17% peak in May. The Fed raised its rate to 4% in September from 3.75%.
The Briefing · Written October 1, 2026 · Numbers and charts update with each release
Both inflation measures remain above the 2% target, with CPI well below its May peak
CPI and core PCE, annual % change, with the Fed's 2% target
Sources: BLS (CPIAUCSL), BEA (PCEPILFE). CPI for October 2025 was not published.
Inflation is up on the month but down on the spring. CPI inflation was 3.35% in August against 3.3% in July, and the latest three months average 3.37%, compared with 3.74% for the three months before. The May high of 4.17% has not been revisited. The figure has been above 3.0% for six months and sits 1.35 percentage points above the 2% target. Core PCE inflation, the Fed's preferred gauge, rose to 3.01% from 2.98%, below its May high of 3.16%.
Pay is not keeping up. Average hourly earnings grew 3.09% in the year to August, the lowest reading in the two years on record here, and 0.27 percentage points below CPI inflation. A year ago pay growth was 3.98%. The read would change if CPI on October 14 fell below 3.0%, or if core PCE on October 29 rose above its May high of 3.16%.
What 3.35% means for you
Prices are rising faster than the Fed's target
Annual CPI inflation is 1.35 percentage points above the 2% target, and was 2.94% a year ago.
Paychecks are growing slower than prices
Wage growth of 3.09% is 0.27 percentage points below inflation, so pay after inflation is shrinking.
The Fed's rate is a quarter point higher
The Fed funds rate rose to 4.0% in September from 3.75% in August, and is 0.25 percentage points below a year ago.
The next test: what would change the answer
Moderate confidence. Inflation is edging up from July but is well below its May peak. Core PCE is just above 3%, and the Fed has raised rates.
CPI inflation falling below 3.0% in the October 14 release
Core PCE inflation rising above 3.16%, its May high, in the October 29 release
CPI inflation climbing back toward the 4.17% peak from May
Questions readers ask
Is inflation going up or down?
Up slightly on the month. CPI inflation was 3.35% in August against 3.3% in July. It is still below the 4.17% high of May 2026.
What is the current inflation rate?
CPI inflation was 3.35% in the year to August 2026. Core PCE inflation was 3.01%. The Fed's target is 2%.
Are wages keeping up with inflation?
No. Average hourly earnings grew 3.09% in the year to August, which is 0.27 percentage points below CPI inflation. Wage growth was 3.24% in July.
Did the Fed raise interest rates?
Yes. The Fed funds rate rose to 4.0% in September from 3.75% in August. A year earlier it was 4.25%.
When is the next inflation report?
The next CPI report is due on October 14, followed by PPI on October 15 and PCE inflation on October 29. The following CPI report is due on November 10.