Economy
US inflation picks up as gas prices spike to cement Fed hike bets
Inflation in the United States gained pace last month as gas prices spiked in the wake of renewed fighting in the Middle East, underscoring the affordability challenges that are top of mind for many voters with midterm elections now just seven weeks away.
The consumer price index rose 3.4% last month compared with a year ago, the Labor Department said Friday, the same as in July. But on a monthly basis, inflation quickened, as costs jumped 0.4% from July to August, up from an increase of just 0.1% the previous month.
The figures show that inflation remains stubbornly elevated, more than five years after prices first soared as the economy emerged from the COVID pandemic. Friday’s report increases pressure on the inflation-fighters at the Federal Reserve (Fed) to boost the benchmark interest rate at a meeting next week, which could lift mortgage and auto loan costs in the months ahead.
Fed Chair Kevin Warsh and other officials “signaled that interest rates can remain on hold only if disinflation continues and today’s August report did not deliver that,” said Kathy Bostjancic, chief economist at Nationwide.
Worsening inflation isn’t all due to spiking gas costs. Prices for appliances, car repairs, and wireless phone services also jumped last month. And economists worry that more expensive fuel can spill into other parts of the economy. For example, diesel prices have hit record highs above $6 a gallon, which pushes up the cost of shipping for groceries and other goods delivered by truck.
Airline tickets rose 2.7% on a monthly basis, according to the new data, and have soared more than 23% from a year earlier.
Excluding the volatile food and energy categories, core prices were 2.4% higher in August than a year ago, down slightly from July’s 2.5% and the third straight decline. But on a monthly basis, core prices rose 0.3% from July to August, the largest increase since April.
The larger-than-expected monthly increase in core prices will likely embolden those Fed officials who have pushed for higher interest rates. Wall Street investors now see a more than 80% chance that the Fed will increase rates next week, according to CME FedWatch, a 10-point jump from Thursday.
The Trump administration is seeking to counter voter concerns about high prices and rising interest rates.
President Donald Trump on Wednesday promised $5,000 payments to every American adult if the GOP keeps a majority in Congress, a move that would require congressional approval and could stoke inflation. And Treasury Secretary Scott Bessent has stepped up buybacks of Treasury bonds in an effort to keep longer-term interest rates lower. Yet on Thursday the yield on the 10-year Treasury reached a nearly three-year high, though it declined in early trading Friday to a still-elevated 4.9%.
Gas prices jumped 3.9% just from July to August, Friday’s report said, leaving gas prices more than 27% higher than a year earlier. Prices at the pump have jumped further this month, which means inflation is likely to worsen next month. The nationwide average cost of a gallon of gas on Friday leapt more than 7% from a month ago to $4.30.
In addition to rising plane tickets, hotel room prices climbed 2.4% just from July to August and are 3.2% more expensive than a year ago. Wireless phone services, appliances, and car repairs also got more expensive last month.
Apparel and grocery prices were unchanged from July to August, providing some relief to consumers, though eggs moved 2.9% higher last month. They are still down sharply from a year earlier.
Many economists and Federal Reserve officials have long considered higher gas prices one of several “one-time” shocks that are lifting inflation, along with tariffs and surging investment in AI data centers. For months, the hope has been that as the war against Iran wound down, and the effects of tariffs faded, inflation would grind lower.
Yet there are few signs of the Iran war cooling, and even Trump has said gas prices won’t retreat until after the midterm elections in November. And while Trump’s trade fight with Canada will impact a small number of imports, it is a reminder that tariffs remain a threat that could push up other costs.
“This is not one and done,” said Kathy Bostjancic, chief economist at Nationwide. “It’s unclear when tensions in the Middle East are going to settle down. … This seems like it could be a prolonged disruption.”
While core prices are rising more slowly than overall prices, more expensive oil and gas could spread through more of the economy. Pricier jet fuel will likely push airfares even higher, and more expensive diesel will raise shipping costs, which could make groceries and other goods shipped by train and truck more expensive. On Thursday, a wholesale price report showed a jump in chemical prices, likely a result of more expensive oil.
Friday’s report has spurred many economists to pencil in a rate hike at the Fed’s meeting next week. Chair Warsh suggested he was leaning toward a rate hike in a high-profile speech two weeks ago, but he did not commit to doing so at a specific time.
Warsh has said he doesn’t want to tip his hand about his next moves, leaving some uncertainty going into the meeting.
The Fed left its key rate unchanged at its last policy meeting in late July, but three officials voted in favor of hiking by a quarter point, which would have increased it to about 3.9% from 3.6%.
Türkiye recorded the first current account surplus in nine months in July, official data showed Friday, as strong services revenues and an improvement in the trade deficit supported the external balance.
Data from the Central Bank of the Republic of Türkiye (CBRT) showed the current account balance posted a $36 million surplus in July. The balance last posted a surplus in October 2025, when it stood at $477 million.
The current account excluding gold and energy registered a $4.97 billion surplus, compared with a $1.4 billion surplus a month earlier, according to the data.
The balance of payments-defined foreign trade deficit stood at $5.58 billion in July.
On an annualized basis, Türkiye’s current-account deficit was about $40.7 billion in July, while the balance of payments-defined foreign trade deficit stood at $77.2 billion.
Services, meanwhile, generated a net surplus of $63.5 billion, partially offsetting deficits of $25.2 billion in primary income and $1.9 billion in secondary income.
Services remained a key contributor to the monthly balance, posting net inflows of $8.23 billion in July; travel, under services, generated net revenue of $5.97 billion, while transportation contributed $2.89 billion.
The improvement came as global economic uncertainty remained elevated amid risks stemming from the Middle East, with higher energy prices linked to geopolitical tensions emerging as a key threat to the global outlook.
Exporters’ strong position
Treasury and Finance Minister Mehmet Şimşek said exporters had maintained their position in global markets despite rising uncertainty and cost pressures in global trade, supported by product and market diversification, strong production infrastructure and their ability to adapt quickly to changing conditions.
In a post on the social media platform X, he said resilient services exports were also supporting the external balance and that further steps would be taken to strengthen exporters’ competitiveness.
Şimşek added that structural transformation policies aimed at strengthening high-technology and value-added production would continue, helping Türkiye improve its competitiveness and supply security in response to changes in global trade and geopolitical developments.
On the financing side, portfolio investments recorded a net inflow of $5.84 billion in July, the CBRT data showed.
Non-residents made net purchases of $1.97 billion in equities and investment funds and $2.37 billion in government domestic debt securities. They also recorded net purchases of securities issued abroad by Turkish banks and the general government worth $914 million and $1.71 billion, respectively.
Direct investment posted a net inflow of $514 million during the month. Non-resident direct investment inflows amounted to $1.15 billion, while residents’ external assets increased by $640 million.
Türkiye’s official reserves increased by $14.25 billion in July, the data also showed.
Services key supporter
Kutay Gözgör, research director at Kuveyt Türk Investment, said strong services revenues during the summer season and a monthly improvement in the trade deficit had supported the current account balance.
He described the sharp increase in the current account excluding gold and energy as a positive signal for the underlying trend in the economy.
“The increase in travel revenues, particularly with the effect of the tourism season, as well as the recovery in transportation revenues supported the services balance,” Gözgör told Anadolu Agency (AA). “In addition, the monthly narrowing of the foreign trade deficit was decisive in the current account posting a surplus.”
Gözgör said energy prices and geopolitical developments remained the main risks to the outlook.
He noted that imports rose 10.5% year-over-year in August, with higher energy prices playing a prominent role, while geopolitical risks stemming from the Iran war could put further upward pressure on oil and natural gas prices and widen the trade and current account deficits in the remainder of the year.
Market expectations put Türkiye’s 2026 year-end current account deficit at around $51 billion, while the latest CBRT Market Participants Survey showed an expectation of about $50.1 billion.
Kuveyt Türk Investment maintains its forecast for a $52.9 billion deficit, based on an assumption of Brent crude averaging $84 a barrel.
Brent crude futures were last down $3.45, or 3.21%, to $104.18 a barrel at 1132 GMT Friday. But oil prices remained on course for a weekly gain of more than 8%, as attacks along Middle East shipping routes stoked concerns about prolonged supply disruptions.
Ismet Demirkol, founder of Pariterium Consultancy, said tourism revenues remained crucial to Türkiye’s current account balance.
Although the Iran war had weighed on tourism revenues, a recovery in recent months, combined with seasonal effects, had supported tourism activity and the current account, he said.
Demirkol added that exports of higher-value-added products, particularly technology products, would be increasingly important for improving the external balance.
He also highlighted renewable energy investment, saying greater use of green energy could reduce Türkiye’s structural reliance on oil, natural gas and coal and contribute to a longer-term goal of running current account surpluses.
Anthropic broke up attempts to use its Claude models to develop biological weapons and carry out a suspected Russia-linked cyber espionage campaign against Ukraine, the AI heavyweight said in a report published Thursday.
It also accused Chinese competitors of hacking attempts aimed at extracting Claude’s capabilities in its latest Threat Intelligence report, which documented malicious use of its technology over the past eight months.
A growing number of illegal hacking attempts by rogue AI agents, along with concerns over the technology’s risks voiced by industry insiders, have increased the pressure on leading pioneers in the field, raising the prospect of more regulation.
Two Anthropic researchers warned this week that rapidly progressing artificial intelligence could lead to the extinction of the human race in the not-too-distant future.
Missiles, drones and biological weapons
In its report, Anthropic said it has long been a concern that AI models might one day reach the level of capability where they could help make existing pathogens more dangerous or create entirely new ones.
It documented five examples of scientists using its models in ways that could support biological weapons development.
In one case, a researcher in a region unsupported by Anthropic employed virtual private server infrastructure to access Claude and for weeks used it to plan avian influenza mammalian-adaptation experiments.
Regions not supported by Anthropic include countries like Russia, China and North Korea, among others.
After detecting the misuse, it banned the accounts involved in such research and incorporated its findings into its frontier model safeguards, enforcement, and threat intelligence processes.
Anthropic did not identify the institutions, the countries where they are based, or the specific biological agents and research techniques involved.
It also identified what it called “new categories of threat actors” misusing Claude. That included using the platform to “develop software for conventional weapons, including firearms, missiles, armed drones, bombs, and other munitions, as well as the targeting and control systems that operate them.”
The report detailed incidents of operators in China, Russia and Yemen using Claude to develop software for weapons design and development, or to support intelligence gathering and procurement related to weapons programs.
Rapid improvements in Anthropic’s models have raised new risks, Jacob Klein, its head of threat intelligence, told Reuters.
“A year ago, let’s say you wanted to optimize a drone or optimize the software on a missile, the models just wouldn’t be as good at that task as they are now,” he said.
Russian hackers use Anthropic AI against Ukraine officials
Anthropic found that cybercriminals and state-backed hackers were increasingly using AI to orchestrate and execute large portions of cyberattacks, with humans often serving as overseers rather than hands-on operators.
“The use of AI went beyond simple questions and responses from a chatbot but rather involved the use of multi-agent frameworks,” it said.
One hacking group allegedly ran phishing, hotel Wi-Fi hijacking and WhatsApp-takeover operations against targets in the Ukrainian government, military and diplomatic sectors, using AI at nearly every stage, Anthropic said.
The group’s tradecraft was consistent with Russia-based threat actor Midnight Blizzard, which the U.S. government has previously linked to Russia’s SVR foreign intelligence service.
The group allegedly used AI to build a system that automatically detected when its malware was flagged by security defenses and rewrote the code until it evaded detection.
Anthropic said it also detected and disrupted activity linked to affiliates of the ShinyHunters collective, currently among the most prolific cybercrime enterprises, which is linked to attacks on major corporations around the world.
Chinese AI labs run attacks to extract Claude capabilities
Anthropic said it had disrupted attacks from seven China-based labs, including Alibaba, Moonshot, DeepSeek and Xiaomi, during the period covered by the report.
Operators it linked to Alibaba ran what Anthropic called the largest “illicit distillation” attack, allegedly aimed at extracting the Claude models’ capabilities and using them to improve the Chinese tech firm’s Qwen models.
Anthropic said it observed more than 151 million exchanges it attributed to Alibaba between May and July 2026, peaking at nearly 3 million per day from more than 3,500 accounts it described as fraudulent.
Distillation refers to the process of training smaller AI models using output from larger, more expensive models in a bid to lower the costs of training a new AI tool.
In another misuse of its technology, Anthropic said Kimi chatbot creator Moonshot and DeepSeek allegedly routed live customer conversations, which sometimes included sensitive information, through Claude and used its responses as training data.
China’s Foreign Ministry said it was not aware of the Anthropic report and that the government maintains that AI should be developed for good and opposes distortion of facts and smears against the country.
Oil prices slipped Friday but remained on track to end the week above $100 a barrel for the first time since mid-May and U.S. diesel prices hit a record high, as attacks along key Middle East shipping routes stoked prolonged supply disruption fears.
Brent crude futures fell $1.65, or 1.53%, to $105.98 a barrel by 0758 GMT. U.S. West Texas Intermediate crude fell $1.36, or 1.33%, to $101.12 a barrel.
The benchmarks pared all early gains to trade lower after the Financial Times reported that foreign ministers in the Middle East are trying to work out a temporary deal with Iran to manage shipping through the Strait of Hormuz.
Both benchmarks rose more than 6% Thursday and were still trading more than 10% higher on a weekly basis.
“Some headlines of possible new talks in the Middle East are weighing moderately on oil prices today,” said UBS energy analyst Giovanni Staunovo, adding: “I keep seeing near-term risks to the upside for oil prices, but we should expect ongoing high price volatility too.”
Iran said Wednesday it had attacked 10 ships near the Strait of Hormuz, after the U.S. hit five Iranian oil tankers. Iran’s Islamic Revolutionary Guard Corps said it would escalate its response to any further attacks.
Vessel transits at the Strait of Hormuz fell to seven Thursday from 11 the previous day, preliminary ship-tracking data showed Friday, well below the 10-day average of 15.
The Strait of Hormuz handled about one-fifth of global daily oil and liquefied natural gas supplies before the Iran war began in late February.
Iran-aligned Houthis seized control of Yemen’s port of Mocha Thursday, posing a further threat to Red Sea traffic, while Gulf traffic remains restricted through the Strait of Hormuz as tanker attacks in the region have intensified in recent days.
Attacks from Yemen on Saudi energy facilities marked an escalation beyond Iran and the Strait of Hormuz and raised fears of prolonged disruptions in the broader region, analysts say.
Global oil supply and demand will fall further than previously thought this year, the International Energy Agency (IEA) said, as a lack of progress in ending the Iran war delays the return of normal Middle East flows into 2027.
Supply disruptions lift fuel prices
Oil supply disruptions due to the Iran war, along with Ukrainian attacks on Russia’s refineries, pushed the U.S. national average diesel price past $6 a gallon for the first time ever Thursday, according to price tracker GasBuddy.
The national average of $6.05 is up from $5.85 last week and $3.70 this time last year, according to motor club AAA.
Higher diesel prices mean more expensive transportation for a long list of everyday goods. That’s because diesel is used for many freight and delivery networks. And some businesses have already passed along steeper costs to consumers.
“Refined products, particularly diesel, are feeling a one-two punch right now,” said Tim Waterer, chief market analyst at KCM Trade.
“As long as both the Gulf shipping constraints and Russian refining outages remain in play, diesel and other refined products are likely to show a higher upside tendency than the broader crude market,” he added.
Even if oil prices retreat as tensions ease, they are likely to remain at elevated levels for the rest of the year, adding to inflation uncertainties, said Yu Song, chief China economist at UBS Securities in a commentary.
U.S. President Donald Trump has not shown any signs of easing attacks on Iran. He warned the U.S. may hit Iran’s Pickaxe Mountain near its heavily damaged Natanz uranium enrichment facility, but said he thought the war would end immediately after the November midterm elections.
Elsewhere, China’s state planner said Friday it will raise retail price caps on petrol and diesel from September 12 by 260 yuan ($38.76) and 250 yuan per metric ton, respectively.
Türkiye’s retail sales expanded 10.4% on an annual basis in July, official data showed Friday.
That followed an 11.5% growth in June, the Turkish Statistical Institute (TurkStat) said.
The July rate marked the slowest rate of growth since March 2025, when sales increased 10.3%.
Annual sales growth in non-food products moderated to 14.1% from 17%, while that in food, drinks, and tobacco improved slightly to 3.2% from 3%. Sales of automotive fuel were 8% higher than a year earlier versus a 1.3% gain a month ago.
Data showed that online retail grew 19.8% from last year, slower than the 23.7% jump in June.
On a monthly basis, retail sales edged higher by 0.2% in July, following a 0.5% rise in the prior month.
Separate official data from the Central Bank of the Republic of Türkiye (CBRT) showed that the country’s current account posted a $36 million surplus in July. That compared to a $1.8 billion surplus in the corresponding month last year.
The shortfall on goods trade widened to $5.6 billion from $4.6 billion a year ago, and the services deficit widened to $8.2 billion from $8 billion.
The primary income balance also showed a deficit of $2.6 billion, up from $1.5 billion. Meanwhile, the secondary income shortfall narrowed to $56 million from $153 million.
Turkish pilots have begun flight training as part of the country’s procurement of Eurofighter Typhoon fighter jets, according to the National Defense Ministry.
In a post on Turkish social media platform NSosyal, the ministry said Wednesday that the training process began in August under the agreement signed with the United Kingdom.
It said Turkish Air Force pilots successfully completed their terminology training and have begun flight training.
The agreement signed in late October last year covers 20 Eurofighter jets that Türkiye will buy from the U.K. The deal is worth about 8 billion pounds ($10.8 billion).
This March, the countries signed a technical and logistical agreement for the maintenance and operation of the warplanes.
Britain, a leading partner in the Eurofighter program, had been Türkiye’s most vocal supporter, and the agreement followed long negotiations to overcome a German objection to the sale.
Türkiye’s interest in the Typhoon was first reported in 2022, as Ankara grew frustrated with prolonged negotiations over the acquisition of F-16 fighter jets from the U.S.
Türkiye is scheduled to receive the first of the batch of Typhoons in 2030. The deal provides the option for the sale of more jets in the future.
In addition, Türkiye also plans to purchase 12 secondhand jets from Qatar and 12 others from Oman.
Meanwhile, Türkiye is developing its own fifth-generation fighter jet. Named Kaan, the stealth fighter is sought to replace the Air Force Command’s aging F-16 fleet, which is planned to be phased out starting in the 2030s.
Canadian Prime Minister Mark Carney said Thursday that Ottawa remains prepared to strike a “fair” trade agreement with Washington, revealing he had spoken with U.S. President Donald Trump in recent days as economic tensions between the neighbors intensify.
The once ironclad trading partnership between the North American neighbors has sustained unprecedented blows since Trump returned to office last year.
Carney cut off trade talks last month, saying the U.S. offer was unacceptable, triggering angry responses from Trump, including punishing new tariffs and prompting Canadian retaliation.
But Carney said the pair remain in touch and that “Canada is always ready to strike a fair deal.”
“We believe there is a mutually beneficial deal for Canada and the United States,” the prime minister told reporters in the western city of Calgary, where he was hosting Ukrainian leader Volodymyr Zelenskyy.
“I speak regularly to the president, President Trump. I’ve spoken to him in recent days,” Carney said.
Since the talks broke down last month, Trump has resumed taunting Canada and mocking its leadership, posting a generated image on social media of him towering over Carney and calling him “governor,” with both dressed in hockey gear.
Carney has said he has no interest in escalating the conflict, but insists he will not agree to anything that doesn’t serve Canada’s economic interests.
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