Inflation rises ahead of Fed rate decision
Consumer prices rose 0.4% in August, while shelter costs increased 0.3%, keeping mortgage rates and housing affordability in focus before the Fed meets.
U.S. consumer prices rose more than expected in August, adding uncertainty for homebuyers and sellers already adjusting to higher mortgage rates.
The Consumer Price Index rose 0.4% from July and 3.4% from a year earlier, the U.S. Bureau of Labor Statistics reported Friday. The annual rate was unchanged from July.
Florida Realtors® Chief Economist Dr. Brad O’Connor said inflation can limit buyers’ purchasing power even before mortgage rates are considered.
“For Florida buyers, inflation matters beyond its effect on mortgage rates,” O’Connor said. “When everyday expenses rise, there’s less room in their budget for a home purchase. Buyers need to consider the full monthly cost of ownership, including insurance, property taxes and any association fees. For sellers, that means staying focused on what buyers can afford today, rather than counting on lower mortgage rates to improve demand.”
The gas pump was a major driver of August’s increase, with gasoline prices climbing 3.9% and accounting for more than one-third of the monthly gain. Excluding food and energy, prices rose 0.3% for the month and 2.4% over the year.
Shelter costs also moved higher, rising 0.3% in August and 3% over the past year. Rent and owners’ equivalent rent, which estimates what homeowners would pay to rent their homes, each increased 0.2% for the month. The shelter measure does not track home sale prices.
The report is the last major inflation reading before the Federal Reserve’s Sept. 15-16 policy meeting. The stronger monthly core reading raised expectations that policymakers could increase their benchmark interest rate.
“The upside surprise to core CPI in August means the Fed looks set to hike next week,” Stephen Brown, chief North America economist at Capital Economics, told Mortgage Professional America.
A Fed rate increase does not automatically mean mortgage rates will rise. Mortgage rates are shaped largely by Treasury yields, inflation expectations and demand for mortgage-backed securities.
Melissa Cohn, regional vice president at William Raveis Mortgage, told the publication that a rate increase could reassure bond investors and potentially help mortgage rates move lower.
Freddie Mac reported Thursday that the average 30-year fixed mortgage rose to 6.76% from 6.71% a week earlier. The 15-year rate increased to 6.09% from 6.04%.
The Fed will announce its rate decision Sept. 16.
The Associated Press contributed to this report.
© 2026 Florida Realtors®