US consumer prices rose 0.4% in August 2026 from July, according to the Consumer Price Index (CPI), the government's main measure of the prices households pay. Over the 12 months to August, the same index rose 3.4%.
Those two figures answer different questions. The first is month-on-month inflation: how fast prices moved in the latest month. The second is year-over-year inflation, also called year-on-year: how far prices moved over a full year. This guide shows how each is worked out and what an annualised rate is. It also shows why a month from a year ago can move today's 12-month figure.
What is year over year inflation? Year-over-year inflation, also called year-on-year or 12-month inflation, is the percentage change in a price index from the same month a year earlier. Month-on-month inflation compares the index with the month before.
In August 2026, US consumer prices rose 0.4% on the month and 3.4% on the year, on the Consumer Price Index.
An annualised rate shows what one month's change would add up to if it went on for a year. August's 0.4% works out at 4.9% a year.
The 12-month rate also moves when an old month drops out. In June 2023 it fell from 4.0% to 3.0%. A 1.4% rise from June 2022, before seasonal adjustment, left the calculation, while June 2023 added only 0.3%.
What is year over year inflation?
The CPI is published by the Bureau of Labor Statistics (BLS) each month. It is measured in index points, set so that prices in 1982 to 1984 average 100. We explain how the basket is built in What Is CPI?
Year-over-year inflation compares the index with the same month a year earlier. In August 2026, the index before seasonal adjustment stood at 334.98. In August 2025, it stood at 323.98. Divide one by the other and subtract 1: prices were 3.4% higher.
The BLS works out this 12-month figure on the raw index, before any adjustment for regular seasonal swings. We explain those swings in the next section. Its release for August said the index "increased 3.4 percent before seasonal adjustment" over the last 12 months. That is the official 12-month inflation rate.
What is month-on-month inflation?
Month-on-month inflation compares the index with the month before. Some price moves come at about the same time every year, such as those from weather, holidays and sales, according to the BLS. So the BLS uses a seasonally adjusted index for monthly changes, with those regular swings taken out.
In July 2026, the seasonally adjusted index stood at 332.81. In August, it stood at 334.13. That is a rise of 0.4%, the figure in the BLS release. Before the index levels are rounded, the rise was 0.396%.
On FRED, the free data site of the Federal Reserve Bank of St. Louis, the two versions are CPIAUCSL (seasonally adjusted) and CPIAUCNS (not seasonally adjusted). We show how to download them in What Is FRED Economic Data?
How to annualise a monthly inflation rate
A monthly change looks small next to a yearly one. Annualising puts the two on the same scale. It asks: if prices kept rising at this month's pace for 12 months, where would they end up?
The formula compounds the monthly change: (1 + monthly change)^12 − 1. For August 2026, that is 1.00396 multiplied by itself 12 times, minus 1. The answer is 4.9%. Every annualised rate in this guide is worked out from the unrounded monthly change.
Simply multiplying 0.396% by 12 gives 4.8%. Compounding adds a little, because each month's rise builds on the one before. An annualised rate is a what-if figure, never a forecast.
CPI's monthly change, 2021 to 2026
Source: FRED (CPIAUCSL); YX Insights
The chart shows every monthly change from January 2021 to August 2026, after seasonal adjustment. The largest rise was 1.3%, in June 2022. Prices fell in three months: July 2022, June 2024 and June 2026.
The June 2026 fall, of 0.4%, was the largest since April 2020. The BLS said energy was the largest contributor, with its energy index down 5.7% in the month. Three months earlier, in March 2026, prices had jumped 0.9%. The BLS gasoline (petrol) index rose 21.2% that month, which "accounted for nearly three quarters" of the rise.
There is no figure for October or November 2025. The BLS did not collect October prices during the US government shutdown. November's change would be measured against October, so it is missing too.
Annualised monthly vs 12-month inflation, 2021 to 2026
Source: FRED (CPIAUCSL, CPIAUCNS); YX Insights
The orange line annualises each month's change. The blue line is the 12-month rate. Both come from the same Consumer Price Index, but they behave very differently.
From January 2021 to August 2026, the annualised monthly rate ranged from −5.0% in June 2026 to 16.2% in June 2022. The 12-month rate ranged from 1.4% to 9.1%. On average, the annualised rate moved 2.8 percentage points from one month to the next. The 12-month rate moved 0.35 points.
The 12-month rate is smoother because each new month is only about 1/12 of it. That makes it a better guide to the trend, but a slower one. In 2026, it rose from 2.4% in February to 4.2% in May, then eased to 3.4% by August.
What is a base effect?
The 12-month rate covers a rolling window of 12 months. Each month, a new month joins the window and the same month from a year earlier leaves it. A base effect is the change in the 12-month rate caused by the month that leaves.
Source: FRED (CPIAUCNS); YX Insights
The chart shows the clearest recent case. In June 2022, prices rose 1.4% before seasonal adjustment, the largest monthly rise of the 2021 to 2023 surge. After seasonal adjustment, the same month shows 1.3%, as in Chart 1. In June 2023, prices rose 0.3% before seasonal adjustment.
When June 2023 replaced June 2022 in the window, the 12-month rate fell from 4.0% in May 2023 to 3.0% in June. Prices were still rising. The rate fell because a 1.4% month left and a 0.3% month joined, both before seasonal adjustment.
A quick rule gets close: last month's 12-month rate, plus the new month, minus the month leaving. It uses the months before seasonal adjustment. Here that is 4.0 + 0.3 − 1.4, or 2.9. The published rate was 3.0%, with the gap down to rounding.
The same rule works in reverse. In April 2020, prices fell 0.7% before seasonal adjustment. When that month left the window, the 12-month rate jumped from 2.6% in March 2021 to 4.2% in April 2021.
April 2021 itself added a rise of 0.8% before seasonal adjustment. The quick rule gives 4.1%, close to the published 4.2%.
Which measure the Fed's target uses
The Federal Reserve's inflation goal is set on the yearly measure. Its Statement on Longer-Run Goals was last reaffirmed on 27 January 2026. It names "inflation at the rate of 2 percent, as measured by the annual change" in the Personal Consumption Expenditures (PCE) Price Index.
The Fed uses the PCE Price Index, not the CPI, as we explain in What Is PCE Inflation?
Jerome Powell, then the Fed's Chair, also pointed to the monthly figures. On 25 August 2023, he said "the lower monthly readings for core inflation in June and July were welcome". He added that "two months of good data are only the beginning". Core inflation leaves out food and energy, as we explain in Core vs Headline Inflation.
In the same speech, Powell cited inflation "measured over the past three and six months". To August 2026, CPI rose at an annualised 0.2% over three months and 4.1% over six months. Both windows hold the June fall. Only the six-month window also holds the rises of March to May, led by March's 0.9% jump.
How to read monthly and yearly inflation figures
Check which index. The monthly change is seasonally adjusted, while the 12-month change is not.
Do not treat one month as a trend. A single annualised month swung from 10.9% in March 2026 to −5.0% in June 2026.
Look at the month leaving. A big month a year ago can pull the 12-month rate down, even while prices keep rising. A fall a year ago can push it up.
Look for a cause. Energy drove both of the big 2026 moves, according to the BLS. We explain the drivers of inflation in What Is Inflation?
Month-on-month inflation shows the latest pace, while year-over-year inflation shows the trend over a full year. Before reading too much into the 12-month figure, check the month that is dropping out.
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Common questions about year over year inflation
What is CPI measured in?
The Consumer Price Index is measured in index points, not dollars. The index is set so that average prices in 1982 to 1984 equal 100. In August 2026, the index before seasonal adjustment stood at 334.98, so prices had more than tripled since then. Inflation is the percentage change in those points between two dates.
How do you calculate year over year inflation?
Divide this month's index by the index for the same month a year earlier, subtract 1 and multiply by 100. For August 2026, 334.98 divided by 323.98 gives about 1.034, so year-over-year inflation was 3.4%. Use the index before seasonal adjustment to match the official figure.
What does annualised inflation mean?
Annualised inflation shows what one month's price change would add up to if it carried on for 12 months. The formula is (1 + monthly change)^12 − 1. US consumer prices rose 0.4% in August 2026, which annualises to 4.9%. It is a what-if figure, never a forecast.
Can month-on-month inflation be negative?
Yes. A negative month means the price index fell from the month before. US consumer prices fell in three months between January 2021 and August 2026: July 2022, June 2024 and June 2026. The June 2026 fall, of 0.4%, was the largest since April 2020. Energy was the largest contributor, according to the Bureau of Labor Statistics.
What is a base effect in inflation?
A base effect is a change in the 12-month inflation rate caused by the month that drops out of the calculation. In June 2023, US inflation fell from 4.0% to 3.0%. The main reason was that a 1.4% monthly jump from June 2022, before seasonal adjustment, left the 12-month window. Prices were still rising.
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