Wireless Price Hikes Played Surprise Role in Fed’s Rate Hike Decision

A sharp jump in cellular service prices helped push a key U.S. inflation measure above expectations in August, strengthening the case for a Federal Reserve interest rate increase next week. Core inflation, which excludes food and energy, rose 0.3% for the month, higher than the 0.2% economists had forecast. A 5.9% surge in wireless telephone service prices alone added roughly a tenth of a percentage point to that core reading.

Carrier Plan Changes Behind the Spike

Economists at major financial firms pointed to recent pricing changes by AT&T and T-Mobile as the likely cause. AT&T had announced price increases on select plans earlier this year, while T-Mobile phased out several older plans, leading to higher costs for many customers. The Bureau of Labor Statistics did not provide further detail on how these changes affected the data.

Fed Unlikely to Overlook Broader Trend

Despite the one-time nature of the wireless price jump, analysts said the Fed is unlikely to dismiss the overall inflation reading. One economist noted that even excluding wireless costs, core inflation would still have come in at 0.2%, suggesting underlying price pressures remain a key concern heading into next week’s policy meeting.