Inflation has been wreaking havoc on consumers for well over a year now. But given the notable drop in gas prices drivers benefited from last month, economists were hopeful that overall inflation levels would decline in August.

That didn't happen, though. The U.S. Bureau of Labor Statistics just released August data for the Consumer Price Index (CPI), which measures changes in the cost of consumer goods, and its report showed that inflation rose 0.1% on a seasonally adjusted basis. On an annual basis, the CPI rose 8.3%.

Of course, regardless of the CPI's reading, the reality is that consumers are facing sky-high living costs just about everywhere they turn. In fact, a big reason the CPI rose in August was that higher food and housing costs offset a notable decline in gas prices.

A person in a store holding a bunch of bananas.

Image source: Getty Images.

But the bigger issue for consumers isn't the CPI number itself -- it's the fact that the Federal Reserve might react to August's uptick by moving forward with aggressive interest-rate increases. That could drive borrowing costs upward to an extreme degree and lead to a pullback in spending.

Meanwhile, if that pullback is severe enough, consumers could be in for a recession at some point in the not-so-distant future. That could lead to an uptick in unemployment levels on a national level, not to mention send the stock market reeling.

But while a rise in the CPI wasn't the news consumers or economists) wanted to hear, one positive takeaway is that it could lead to a higher cost-of-living adjustment (COLA) for Social Security recipients in 2023. And while we won't know what next year's COLA will look for another month, based on recent inflation data, it's fair to assume that 2023's raise will be the largest one seniors have seen in decades.

A giant boost is on the way

It's too early to say exactly what 2023's Social Security COLA will amount to. That's because that raise is based on third quarter CPI data. Since we're still in mid-September, we simply don't have all of the pieces of the puzzle just yet, and we won't get a COLA announcement until October 13, when September CPI data becomes available.

But based on inflation readings for July and August, it's fair to say that 2023's COLA will far surpass the 5.9% raise seniors got at the start of 2022. And if Medicare Part B premiums don't rise substantially, seniors could end up walking away with quite a bit of extra money on a monthly basis.

Of course, it's important to recognize that higher COLAs don't necessarily put seniors in a better position with regard to buying power. When COLAs are generous, it's because they need to be due to higher levels of inflation. And so seniors who get the bulk of their income from Social Security won't necessarily be in a position to coast financially once their COLA kicks in.

But still, a lot of people who rely heavily on Social Security are eager to see their benefits get a solid boost in 2023. And August's inflation levels make that all the more likely.