U.S. consumer prices rose sharply in August, according to new data from the Labor Department. The Consumer Price Index (CPI) increased by 0.4% last month, the biggest gain since January. On a yearly basis, inflation stood at 2.9%, also the highest since January.
Housing and Food Prices Lead the Rise
The jump in inflation was driven mainly by higher housing and food costs. Shelter costs, which include rent and hotel stays, rose 0.4%. Food prices climbed 0.5%, with groceries alone rising 0.6%.
Tariffs have also pushed up costs. Coffee and beef prices are higher due to import duties and supply issues. Labor shortages on farms, linked to immigration crackdowns, added more pressure on food prices.
Core Inflation Also Climbs
When food and energy are excluded, core CPI also rose 0.3%, the same as July. Airline fares spiked 5.9%, hotel prices jumped 2.3%, and used car prices increased 1.0%. Over the past 12 months, core inflation held steady at 3.1%.
Jobless Claims at Highest Since 2021
The same report week brought bad news for workers. Jobless claims rose to 263,000, the highest since October 2021. This was 27,000 more than the previous week. Economists had expected 235,000.
Recent revisions also showed that U.S. job growth may have been overstated by almost one million jobs over the past year. In August, hiring slowed sharply, and June even saw job losses.
Fed Still Expected to Cut Rates
Despite the hot inflation data, analysts believe the Federal Reserve will cut rates next week. A quarter-point cut has already been priced in by markets.
Weak job growth and higher jobless claims suggest the economy is slowing. This combination of rising inflation and weaker labor conditions has sparked stagflation fears.
Outlook
The dollar slipped, and U.S. Treasury yields fell after the reports. Investors are watching closely to see how the Fed balances inflation pressures with a weakening job market.
