United States consumer prices rose slightly faster than expected in August while unemployment claims surged to their highest level in nearly four years, delivering the final set of data the Federal Reserve will weigh as it prepares to decide on interest rates next week.
The consumer price index advanced 0.4% on a seasonally adjusted basis, slightly above the 0.3% expected and marking the largest monthly gain since January, while the annual inflation rate to 2.9%, the highest since the start of the year and in line with estimates.
Core CPI, which excludes volatile food and energy categories and is viewed by the Fed as a clearer measure of underlying price pressures, climbed 0.3% in August and 3.1% from a year earlier, both in line with forecasts.
The central bank targets 2% inflation over the long run.
The biggest driver of August’s inflation uptick came from shelter costs, which make up about one-third of the index and rose 0.4% on the month.
Food prices climbed 0.5%, while energy costs increased 0.7%, including a 1.9% jump in gasoline.
The Bureau of Labor Statistics noted that tariffs appeared to contribute to the rise, with new vehicle prices gaining 0.3% and used cars and trucks rising 1%.
Services prices excluding energy increased 0.3% for the month and 3.6% annually, with shelter also up 3.6% year-on-year but easing steadily from 2023 highs.
ANZ analysts noted: "The August CPI report is consistent with our view that tariff-driven inflation appears transitory. While prices rose in some categories, there were goods where prices moderated from summer highs.
"We continue to maintain that the data support a 25bp rate cut with forward guidance about further easing, which can be stepped up if required.
"Our baseline forecast is for a series of five 25bp rate cuts, including one next week."
On the employment front, the Labor Department reported initial jobless claims rose by 27,000 to 263,000 for the week ending September 6, the highest since October 2021 and well above forecasts of 235,000.
Continuing claims were unchanged at 1.94 million but have been trending near their highest levels in four years.
Fed Chair Jerome Powell has repeatedly characterised the jobs market as “solid”, though the latest data suggests a shift in momentum.
Markets largely interpreted the mixed signals as reinforcing expectations of an imminent rate cut.
According to the CME Group FedWatch Tool, markets are pricing in a 93.9% chance of a 25 basis point cut, and a 6.1% chance of a larger, 50 basis point cut.
