Consumer Prices Spike to 17-Year High

Updated from 9:06 a.m. EDT.

Consumer prices increased 0.8% in July, doubling the consensus estimate of economists and hitting a 17-year high, according to data released by the Labor Department.

On a seasonally adjusted basis, the rise in the consumer price index for all urban consumers was driven primarily by a 4% spike in energy costs due to soaring crude oil and gasoline costs. Food prices also contributed to inflation, jumping 0.9%

Economists had expected a 0.4% increase in seasonally adjusted CPI for July. The measure has increased 1.1% in June and 5.6% over the past year.

Energy prices have weighed heavily on inflation since May, rising 4.4% that month and 6.6% in June before the most recent increase. During that time, crude oil soared to almost $148 a barrel. Crude has since backtracked from that record high, however, as light, sweet crude for September delivery was trading at $115 a barrel in recent action at the New York Mercantile Exchange.

The U.S. Oil ETF(USO Quote) also has fallen more than 21% from its high of $119.17 reached July 11. The ETF closed at $93.75 Wednesday.

The unexpectedly high inflation number would seem to damp hopes that the Federal Reserve will consider a cut to its target interest rate anytime soon. The federal funds rate, the target rate for banks to lend to each other, has sat at 2% since April, after the Federal Open Markets Committee had cut it 325 basis points over 16 months.