August inflation climbs to 3.4%, boosting Fed hike odds

Inflation held steady in August, with consumer prices rising 3.4% from a year earlier, matching July's pace but coming in slightly higher than economists had forecast as gasoline costs kept prices elevated.

The hotter-than-expected report increases the likelihood that the Federal Reserve will issue its first interest rate hike in more than three years next week, analysts said on Friday. After Friday's release of the inflation data, the likelihood of a rate hike next week jumped to 90%, up from 70% the previous day, according to CME FedWatch, which bases its forecast on 30-day Fed funds futures prices.

Gasoline and diesel prices, up 27.4% and 60% respectively, contributed more than one-third of the monthly CPI increase, and the surge could ripple through the economy as businesses hike prices to offset their higher energy costs.

Read the full story at CBS News.