A spike in gas prices pushed up inflation in August, yet most other costs rose at a more modest pace, evidence that price increases overall are still cooling.

In a set of conflicting data released Wednesday, the Labor Department said the consumer price index rose 3.7% in August from a year ago, up from a 3.2% annual pace in July. Yet excluding the volatile food and energy categories, so-called core prices rose 4.3%, a step back from 4.7% in July and the smallest increase in nearly two years. That is still far from the Federal Reserve's 2% target.

Despite the seemingly divergent figures, the decline in the core measure points to inflation coming under control. The Federal Reserve closely tracks core prices because they are seen as a better indicator of future inflation trends. Wednesday's figures also make it more likely the Fed will skip an interest rate hike at its meeting next week. While elevated gas prices could elevate inflation this month as well, most economists believe that inflation will slowly decline through the end of the year.

In a statement, President Joe Biden hailed the report as "more evidence" that so-called "core inflation" is trending downard while employment remains high.

"Overall inflation has also fallen substantially over the last year, but I know last month’s increase in gas prices put a strain on family budgets," Biden acknowledged. "That’s why I remain laser-focused on cutting energy costs, including by investing in clean energy to bolster our energy security."

"We’re continuing to build an economy from the middle out and bottom up, with better jobs and lower costs — even as Republicans in Congress push for tax cuts for the wealthy and large corporations and devastating cuts to programs hard-working Americans count on," the president added.

On a monthly basis, consumer prices jumped 0.6% in August, the biggest increase in more than a year. Gas prices spiked nearly 11% in August, though they have since levelled off: According to AAA, the average nationwide price at the pump was $3.84 on Tuesday, little changed from a month ago.

Excluding food and energy, core prices increased just 0.3% in August from July, though that is up from 0.2% in the two previous months.

Energy costs rose 5.6% just in August, the biggest monthly increase since June 2022. Auto insurance prices also soared, rising 2.4% last month and 19.1% compared with a year ago.

But prices fell or rose more slowly last month for many other items: Used car costs dropped 1.2%, the third straight decrease, while hotel prices fell 3%, also the third consecutive fall.

Federal Reserve officials are becoming more open to the idea that inflation is coming under control, though chair Jerome Powell said last month it was still "too high."

But in his high-profile speech at Jackson Hole, Powell said that the Fed would proceed "carefully" with any further rate hikes, which many economists saw as an opening for the Fed to skip a rate increase at its September 19-20 meeting. When the Fed increases its key rate, it typically raises the cost of mortgages, auto loans, and business borrowing.

The Fed has lifted its benchmark interest rate 11 times in the past 12 meetings to about 5.4%, the highest level in 22 years. It increased the rate a quarter-point in July after leaving it unchanged in June.

Lorie Logan, president of the Federal Reserve's Dallas branch, said last week that "another skip could be appropriate" at its next meeting, "but skipping does not imply stopping."

Investors see only a 7% chance of a rate hike next week, according to CME's FedWatch. But they have priced in a 38% change for an increase at the Fed's subsequent meeting in November.

The European Central Bank is also contemplating lifting its key interest rate at its next meeting Thursday, though officials could choose to also skip an increase. The European economy is nearing recession as it struggles with high inflation and rising borrowing costs.

The 20 countries that use the euro currency are expected to grow just 0.8% this year, according to a gloomy forecast issued Monday by the European Commission, the European Union's executive arm. Germany's economy, the EU's largest, is projected to shrink 0.4%. Inflation in the EU is higher than in the U.S. — it was 5.3% in July — though that is half of the 10.6% peak reached in October.