Inflation rose two-tenths of a percentage point to 2.9% for the year ending in August in the consumer price index, the Bureau of Labor Statistics reported Thursday, raising fears about price pressures from tariffs.
In the month of August alone, prices rose 0.4%.
Core inflation, a measure that strips out volatile food and energy prices, held steady at a 3.1% annual rate.
The rise in the headline rate of inflation suggests that price pressures are still increasing as President Donald Trump carries out a trade war with his historic tariffs. Economists generally expect the tariffs to have the effect of raising prices.
The specifics of the report, though, did not provide conclusive evidence about the effects of tariffs. The largest factor pushing up prices was shelter, which may not have been driven by tariffs. Prices have risen relatively quickly for some goods that might be affected by tariffs, such as food and auto parts. But other similar categories have not seen big mark ups, such as appliances.
“Tariffs at work? There is no way to tell,” Carl Weinberg, an economist for High Frequency Economics, wrote in a note on the report.
Overall, the report did not provide enough of a signal that inflation is rising to dissuade the Federal Reserve from easing monetary policy. Following its release, investors bet that the central bank will proceed faster this year with cuts to its interest rate target.
Friday’s report is the last such inflation report the Fed will receive before it meets next week to decide whether to cut interest rates. Trump has been pushing the Fed to cut rates for months, and investors expect that to be the outcome next Wednesday.
The Fed also has the latest producer price index to consider. The PPI report released on Wednesday showed that inflation unexpectedly fell seven-tenths of a percentage point to 2.6% for the year ending in August.
The Fed’s goal is 2% annual inflation. Even though inflation has not yet met that target, markets generally expect the Fed will need to loosen monetary policy because of recent indications the labor market is slowing.
The economy added just 22,000 jobs in August, and the unemployment rate rose to 4.3%, the BLS reported last week. Also, the July jobs report revealed that some 258,000 fewer jobs were added in May and June than previously reported.
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Additionally, on Tuesday, the BLS announced that labor market growth for the 12 months ending in March was 911,000 jobs less than previously reported.
Still, it is worth noting that despite the downward job revisions, economic output has been up. U.S. GDP expanded at a 3.3% annual rate in the second quarter, the Bureau of Economic Analysis reported in its most recent projection.
