August CPI Report Shows Persistent Price Pressures
Inflation accelerated in August, adding pressure to U.S. households and leaving consumer prices well above the Federal Reserve’s 2% target. The Bureau of Labor Statistics reported Thursday that the consumer price index (CPI) increased 0.4% from July and 2.9% year-over-year. Core CPI, which excludes food and energy, rose 0.3% on the month and 3.1% annually, in line with forecasts.
The monthly gain was hotter than economists had expected, though the annual figure matched consensus. The report arrives just days before Fed officials decide whether to cut interest rates at their September meeting.
Food and Housing Lead Gains
Food prices advanced 0.5% in August, with the grocery index climbing 0.6% and restaurant meals up 0.3%. Compared with a year earlier, overall food costs are 3.2% higher. The meats, poultry, and fish index jumped 1.1% last month and 5.4% annually, while fruits and vegetables rose 1.6% on the month.
Housing costs, the largest CPI component, rose 0.4% in August and 3.6% year-over-year, making shelter the primary driver of inflation. Energy prices increased 0.7%, led by a 1.9% rise in gasoline, though pump prices remain down 6.6% from a year ago. Electricity costs dipped slightly in August but are up more than 6% compared with 2024.
Other Categories Show Mixed Trends
Transportation costs climbed 1% last month, including a 5.9% spike in airline fares and a 2.4% increase in auto repair costs. Apparel prices gained 0.5% while footwear fell 0.4%. Furniture, bedding, and household tools also registered monthly gains. Overall, consumer goods remain more expensive, with furniture up nearly 5% from last year.
Fed Prepares for Potential Rate Cut
The inflation data arrives as Fed Chair Jerome Powell and policymakers weigh whether slowing job growth outweighs persistent price pressures. Powell has signaled that if inflation and labor markets both weaken, the Fed will focus on the risk furthest from its target. Analysts say tariffs are beginning to push up prices, particularly for cars and clothing.
Markets have priced in a September rate cut, with CME FedWatch showing a 90.8% chance of a 25-basis-point move. Some economists caution that another cut in October could be delayed if inflation expectations begin to rise. For now, many on Wall Street expect the Fed to prioritize stabilizing employment even as inflation remains stubbornly above target.