Inflation is back! Or so the commentariat would have you believe. The Consumer Price Index (CPI) grew 0.6 percent in August, significantly higher than the previous six monthly increases. Consumer prices have grown 3.7 percent over the last twelve months. If prices were to grow as fast as they did in August for the next twelve months, the annual inflation rate would be 7.2 percent. That looks like a big deal.

Look a little closer, however, and you will see that we’re not in bad shape. Inflation is still trending broadly in the right direction. The Federal Reserve shouldn’t consider another rate hike, at least not yet.

The inflation uptick for August was disproportionately driven by energy prices. Those rose 5.6 percent in August alone—a major swing! Gasoline in particular is up 10.6 percent monthly. But let’s remember that energy prices are notoriously volatile. They frequently surge in summer months. And even apart from seasonal considerations, there’s a lot going on geopolitically that explains pricier energy. We shouldn’t overemphasize this single component of the CPI.