US consumer inflation hits highest level since January but unlikely to deter rate cut

Agence France-Presse :

US consumer inflation rose last month to its highest level since January, government data showed on Thursday, although analysts believed that this would not deter the central bank from an interest rate cut next week.
The data also underscored cost-of-living pressures on households as President Donald Trump’s tariffs filter through the world’s biggest economy, complicating the Federal Reserve’s role in maintaining stable prices.
The consumer price index (CPI) picked up to 2.9 per cent in August, accelerating from 2.7 per cent on a year-on-year basis in July, the Labour Department said. The figure was in line with analysts’ expectations, as economists try to gauge if Trump’s duties will trigger a one-off price increase or lead to persistently higher costs.
On a month-on-month basis, CPI rose 0.4 per cent in August, the report said, also picking up from 0.2 per cent in July. A measure of underlying inflation, stripping away the volatile food and energy components, was up by 3.1 per cent from a year ago.
“We are seeing some impact from tariffs, especially with higher prices on cars and clothes,” said LPL Financial chief economist Jeffrey Roach.
He added that grocery costs also clocked their biggest jump since 2022, adding to consumers’ stress.
Since returning to the presidency in January, Trump has imposed a 10 per cent tariff on almost all trading partners and higher rates hitting dozens of economies.
He has separately targeted sector-specific imports such as steel and autos, and economists warn that the cumulative effect will take time to reach consumers.
All eyes are on inflation numbers, given their potential bearing on the Fed’s interest rate decisions.
But the central bank is poised to start cutting rates at its next policy meeting from September 16 to 17 even with slightly hotter inflation, according to Nationwide chief economist Kathy Bostjancic.
“The jump in initial jobless claims to its highest reading since October 2021 overshadows the importance of the inflation report,” she said, referring to a separate set of data released on Thursday.
The uptick signals that the labour market is losing steam “and reinforces that the Fed needs to start cutting rates next week”.