Key facts
- US inflation rose 2.9% in the year to August, up from 2.7% in July.
- Core inflation, excluding food and energy, held steady at 3.1% year-over-year in August.
- US gasoline prices rose 3.9% in August.
- The unemployment rate ticked up from 4.2% to 4.3% in August.
- Weekly unemployment filings jumped to 263,000, the highest in nearly four years.
US inflation rose in August at the fastest pace since the beginning of the year, according to figures from the US Labor Department, ahead of a key Federal Reserve meeting. Consumer prices increased 2.9% in the year to August, up from 2.7% the previous month, driven by rising costs for cars, household furnishings, and groceries like tomatoes and beef.
The Federal Reserve has kept interest rates unchanged since last year, monitoring the impact of President Donald Trump's import tariffs on consumer prices. Trump has criticized the Fed for not cutting rates as quickly as other central banks.
The latest inflation data is unlikely to derail expectations for a quarter-point rate cut next week, but the uptick may keep policymakers cautious. "President Donald Trump's inflationary policies - tariffs and restrictive immigration measures - are gradually showing up in the hard data and continue to erode consumers' purchasing power," said Atakan Bakiskan, US economist at Berenberg. Trump has dismissed concerns that his policies will drive up prices or weigh on the economy.
Tariffs, which range from 10% to 50% on most goods entering the US, have begun to impact prices for tariff-sensitive products like clothing and household goods. Food prices, particularly tomatoes, have also seen increases, partly attributed to administration policies.
In addition to inflation, the Fed is focused on labor market weakness. Employers added only 22,000 jobs in August, and the unemployment rate rose to 4.3% from 4.2%. Weekly unemployment filings also jumped to 263,000, the highest in nearly four years.
An underlying measure of inflation, excluding volatile food and energy costs, held steady at 3.1% year-over-year in August. "Right now, inflation is a key subplot, but the labor market is still the main story," said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. "That translates into a rate cut next week - and, likely, more to come."
The Labor Department's internal watchdog has launched an investigation into the Bureau of Labor Statistics' data collection methods.