Monday, September 14th, 2026
IRAN War Fallout Keeps U.S. Inflation “HOT”!!!
The August (2026) reports for the final-demand PRODUCER PRICE INDEX (PPI-FD) and CONSUMER PRICE INDEX (CPI) make it “CLEAR” that the current INFLATION episode brought on by the attack on IRAN on February 28th, 2026 is far from over.
As the war drags on with little sign of resolution, ENERGY PRICES remain VOLATILE and ELEVATED. The pass-through of COSTS TO BUSINESSES and CONSUMERS is keeping index readings elevated compared to last year (2025) and well above the FED’s 2 percent INFLATION TARGET.
In particular, prices for DIESEL FUEL essential for transportation of goods are at an “ALL-TIME” HIGH!!!
Businesses are faced with untenable choices to FUEL THEIR FLEETS – RAISE PRICES, CUT RAZOR THIN MARGINS, or LAYOFF WORKERS who will likely be difficult and more expensive to replace.
Even if the conflict with IRAN reaches a swift settlement, it will take some months for the ripple effects on prices to dissipate and many – if not most – prices will NOT roll back.
The August (2026) total PPI is UP 5.4 percent compared to a year ago (2025), and acceleration UP from 4.8 percent in July (2026).
The core PPI for August (2026) – excluding FOOD, ENERGY and TRADE SERVICES – is UP 4.7 percent, the same as in July (2026).
The PPI for FOODS is UP only 0.1 percent from August 2025, but ENERGY soars 24.4 percent.
TRADE SERVICES is UP 4.5 percent year-over-year in August (2026) compared to being UP 4.0 percent in July (2026).
FOOD PRICES often moderate in the late SUMMER and EARLY FALL as the harvest comes in.
HOWEVER, the cost of GETTING FOOD TO CONSUMERS is going to INCREASE PRICES more than usual in the next month or two (2).
The INCREASE in ENERGY PRICES is “EXCEPTIONALLY” LARGE and probably will ease up a bit going into October (2026) but it will still be a substantial move UPWARD.
TRADE SERVICES are already feeling the impacts of “CHAOTIC” TARIFF POLICY and TRANSPORTATION COSTS.
The August (2026) CPI is UP 3.4 percent year-over-year, the same as in July (2026) and virtually the same as being UP 3.5 in June (2026).
The CORE CPI – excluding FOOD and ENERGY – is UP 2.4 percent from August 2025, one-tenth below being up 2.5 percent in July (2026). However, the improvement is mostly due to slower increase in FOOD PRICES while ENERGY COSTS continue to INCREASE.
The CPI for FOOD and BEVERAGES is UP 2.6 percent in August (2026) from a year ago (2025), DECREASING three-tenths from up 2.9 percent in July (2026). The CPI for ENERGY is UP 16.3 percent year-over-year, HIGHER than the 14.7 percent increase in July (2026).
While the August (2026) and July (2026) readings represent something of a plateau in upward CONSUMER PRICE PRESSURES, this will be little consolation to households which have seen their NON-DISCRETIONARY SPENDING DECREASE their overall spending power and eat up any buffer from prior wage gains.
Thus, the FED is expected to implement a 25 bp INTEREST RATE INCREASE as INFLATION pressures build….
PEACE & BLESSINGS
Kenneth Reaves, Ph.D.