US services sector gains steam

The US services sector unexpectedly gained steam in August, with new orders firming and businesses paying higher prices for inputs -- potential signs of still-elevated inflation pressures.

The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing PMI rose to 54.5 last month, the highest reading since February and up from 52.7 in July. A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy.

Economists polled by Reuters had forecast the non-manufacturing PMI would decrease to 52.5, and no economist anticipated a higher reading than 53.9.

Federal Reserve officials have raised the central bank's policy rate by 5.25 percentage points over the last year and a half to bring down too-high inflation, and in recent months have welcomed signs that higher borrowing costs are beginning to bite.

Inflation by the Fed's preferred measure, the personal consumption expenditures (PCE) price index, rose 3.3 percent in July from a year earlier, down from a peak of 7 percent last summer, data published last week showed.