Topline
Inflation worsened as expected in August as President Donald Trump’s tariffs continued to raise consumer prices, according to data released Thursday by the Bureau of Labor Statistics, the last economic report under consideration by the Federal Reserve as it considers interest rate cuts next week.
The Federal Reserve meets next week to decide whether to lower interest rates for the first time since December.
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Key Facts
Consumer prices increased 2.9% last month from August 2024 and 0.4% between July and August, the Bureau of Labor Statistics reported Thursday, matching Wall Street’s estimates, according to FactSet.
Core consumer prices, an economic measurement that excludes the volatile food and energy markets, rose 3.1% annually and 0.3% from July to August, matching projections.
Brian Coulton, chief economist at Fitch Ratings, said in a note Thursday the latest uptick for inflation suggests Trump’s tariffs are beginning to leak through to consumer prices “slowly—quite slowly, in fact.”
The Dow Jones Industrial Average opened trading Thursday nearly 100 points higher (0.2%), while the S&P 500 (up 0.3%) and Nasdaq (0.4%) traded higher in the hour after the inflation report.
What To Watch For
Thursday’s CPI data will be the final major economic report to be considered by the Fed’s policymaking board ahead of its next meeting on Sept. 17. Investors have remained optimistic for interest rates to be cut from a 4.25% to 4.5% range, where they’ve been held since December, with odds placed at 100% after a lighter-than-expected report on wholesale prices on Wednesday, according to CME’s FedWatch tool. The Fed previously voted to keep interest rates at their current range in July, though two Fed officials voted in favor of a quarter-point reduction. Fed Chair Jerome Powell, whom Trump has pressured to cut rates, signaled openness to rate cuts last month, saying during his final address in Jackson Hole, Wyoming: “The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance.”
Key Background
Another inflation reading follows a worse-than-expected uptick to unemployment and historic downward revisions to earlier jobs reports, which drew criticism from Republicans. The unemployment rate rose above forecasts to 4.3% while the U.S. added just 22,000 nonfarm jobs, a figure well below expectations of 80,000 and 79,000 added in July. Earlier this week, the BLS reported employers added 911,000 fewer jobs in the 12 months ending March 2025, marking the largest-ever downward revision by the agency, according to FactSet. Some of Trump’s advisers are reportedly preparing a report detailing errors with the agency’s jobs data, and the Labor Department’s internal watchdog said Wednesday an investigation was opened into how jobs and inflation data are collected by the BLS.