As gas prices decreased in August, the overall pace of inflation held relatively steady during the month, according to new data from the Bureau of Labor Statistics.
The BLS reported on Tuesday that the Consumer Price Index is up 8.3% in the 12-month period ending in August, a decrease from 8.5% the month before, and down from the June 2022 peak of 9.1%.
The news sent stocks tumbling, with the Dow Jones and Nasdaq both reporting significant losses.
"I think there was an expectation that you'd see further easing," said James Dominick of FTI Consulting. "Frankly, though, I don't think anyone is particularly shocked that we continue to see high levels of inflation."
A decline in gas prices helped cool off the overall inflation numbers in July and August. The cost of gas dropped 10.6% in August, the BLS reported.
But "the fact that we're seeing core inflation ahead of expectations shows that it's not just gas that's been causing these issues," Dominick said. "[Gas prices] have been the easiest thing to call out, but that's not the main driver. It's across the board where we continue to see issues."
In the last year, the cost of food overall has gone up 11.4%. Prices rose even faster in the food at home category, which is used as a proxy for grocery prices.
The price of housing continues to increase as well, jumping 6.2% in the 12-month period ending in August.
The rising cost of food and housing disproportionately impacts lower wage earners, who can't cut back on food or housing costs the same way they can scale back their gasoline use.
Those "consumers may have seen some improvement in hourly wages or salaries," Dominick said, "but given the increased cost at the pump and in stores, the challenge there is the hardest."
Many people are tapping into their savings or credit to cover the rising costs.
Credit card debt rose 13% over the past year, the largest increase in more than two decades.
"It's a catch-22," said Dr. Denise Streeter, a finance professor at Howard University. "Do people who don't have money use credit cards when rates are going up on the credit cards as well? Or do people who don't have money to pay for the rising cost just do without?"
Streeter said today's inflation data, coupled with the monthly Personal Consumption Expenditures index, will likely push the Federal Reserve toward another 75-basis-point interest rate hike at its meeting next week.
"It's a difficult environment [for the Fed]," said Dominick, "because at the same time you're trying to tamp down economic activity, consumers are facing these really difficult and severe price increases."
"We have a systematic risk," Streeter said. "We're facing things that employers might not be able to handle, like increased loan costs."
There are signs that some businesses are already buckling under the weight of rising interest rates.
Sixty-three percent of small businesses put hiring on hold because they couldn't afford to add staff, according to one survey from early September.
"We have to understand that there are pros and cons to getting inflation down," Streeter said. "Do we live with it so that people keep their jobs? Or do we have to lose jobs for the rate to go down?"