WASHINGTON–Inflation picked up the pace in August but it likely won’t be enough to dissuade the Federal Reserve from cutting rates when it meets next week, according to one credit union economist.
The Consumer Price Index, released today by the Bureau of Labor Statistics, rose 2.9% compared with the same time last year, the fastest annual pace since the start of 2025.
The overall measure of inflation rose 0.4% for the month, slightly higher than economists had expected. The core measure rose 0.3%.
“Prices rose faster in August, pushing headline inflation higher,” said Dawit Kebede, senior economist with America’s Credit Unions. “Core inflation, which excludes volatile food and energy prices, remained flat on an annual basis. Although there were some increases in tariff-sensitive imported goods such as clothing and new cars, services were the main driver of the year-over-year increase.
‘Expectations’ of Rate Cut
“This report is unlikely to change expectations that the FOMC will cut rates when they meet next week, as the labor market continues to show weakness through slow hiring and rising unemployment,” Kebede continued. “As consumers see increased risks in affording daily life, credit unions will continue to be trusted partners to find affordable solutions to their financial needs.”
The overall measure of inflation rose 0.4% for the month, slightly higher than economists had expected. The core measure rose 0.3%.
Wary of the effects of President Trump’s tariffs on inflation, the Fed has maintained interest rates this year at a range of f 4.25% to 4.5%. The president has been outspoken in his call for a reduction in rates.
The New Data
The new CPI report shows that during August:
- Gasoline prices jumped 1.9% over the month, contributing to a 0.7% increase in the overall energy index.
- Airfares flew 5.9% higher in August, following a 4% increase the previous month.
- New vehicles increased 0.3% in August and the category is up 0.7% compared to the same time last year. Prices for used vehicles rose 1% and are up 6% from a year earlier.
- Shelter prices rose 0.4%, the largest contributor to the overall monthly increase.
- Food prices rose 0.5% over that same period, and 3.2% compared to last year.
