August Consumer Inflation at 7-Month High as Fed Rate Decision Looms

10:07 AM EDT, 09/11/2025 (MT Newswires) -- US consumer inflation accelerated at the fastest pace in seven months in August, while the annual core rate remained above 3% as markets continued to expect an interest rate cut next week.

The consumer price index climbed 0.4% month on month in August, up from a 0.2% gain in the month prior and representing the highest level since January, the Bureau of Labor Statistics reported Thursday. A Bloomberg-polled consensus expected a 0.3% increase.

Annually, inflation accelerated to 2.9% from July's 2.7%, in line with Wall Street's estimates.

Core inflation, which excludes the volatile food and energy components, was steady at 0.3% last month, while the annual core measure was unchanged at 3.1%. Both prints were in line with market expectations.

"Inflationary pressures continued to heat up in August, with broad strength in goods and services inflation," Thomas Feltmate, senior economist at TD Economics, said in a report. "Goods prices are likely to continue to drift higher over the coming months as businesses increasingly pass-on more of the tariff costs."

Markets are currently pricing in a 91% probability that the Federal Open Market Committee will reduce its benchmark lending rate by a quarter percentage point on Sept. 17, with the remaining odds in favor of a 50-basis-point cut, according to the CME FedWatch tool.

"Further upward pressure on services inflation looks limited against the backdrop of a cooling labor market which is likely to limit upward pressure on wage growth and keep a lid on discretionary services spending," Feltmate said.

"But nothing is a guarantee, and policymakers will need to balance the risks of reducing the policy rate by enough to breathe some life back into the labor market, but not by so much that they risk unnecessarily stoking inflation," he said.

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