The U.S. consumer price index rose 3.4% year-over-year in August, aligning with market expectations, while month-over-month inflation climbed 0.4%, reaching its highest level since June. On a seasonally adjusted basis, core CPI edged up 0.3% from the previous month, surpassing the anticipated 0.2% increase.

Meanwhile, the University of Michigan's consumer sentiment index for September dropped sharply to 47.8, and one-year inflation expectations jumped to 4.6%. Diesel prices in the U.S. also breached the $6 per gallon threshold for the first time in history.

In response to these developments, market participants now price in roughly a 90% likelihood of a rate hike at the Federal Reserve's upcoming meeting next week, with expectations of two additional hikes before the year concludes.