Inflation in the United States increased at its fastest pace since the start of 2025, with consumer prices rising 2.9% in the year to August, up from 2.7% the previous month, according to the US Labor Department.
The rise was driven by higher costs for cars, household furnishings, and grocery staples including tomatoes and beef. The uptick comes just ahead of a key Federal Reserve meeting where policymakers are expected to decide whether to cut interest rates.
The Fed has kept rates steady since last year while assessing the impact of tariffs imposed under former President Donald Trump, who has criticized the central bank for not reducing rates as aggressively as other major economies like the UK and Europe.
Economists say the inflation increase is unlikely to prevent the Fed from cutting rates next week by a quarter percentage point but may make officials more cautious about future reductions.
Trump’s tariffs, which impose taxes between 10% and 50% on many imported goods, have contributed to rising prices for tariff-sensitive products such as clothing, household goods, and tomatoes—a staple largely imported from Mexico, which faced a 17% tariff increase in July.
In addition to inflation concerns, the labor market shows signs of weakening. August saw only 22,000 jobs added—far below expectations—and the unemployment rate edged up to 4.3%. Weekly unemployment claims hit a nearly four-year high of 263,000, adding to concerns about the US economic outlook.
Core inflation, which excludes volatile food and energy prices, remained steady at 3.1% year-over-year in August.
Economists suggest that while inflation is an important factor, the labor market’s performance will be the main influence on the Fed’s decisions moving forward.
Meanwhile, Trump has continued to criticize both the Federal Reserve and the Bureau of Labor Statistics (BLS), recently firing the head of the BLS amid unsubstantiated claims of data manipulation. The Labor Department has since launched an investigation into data collection challenges faced by the BLS.
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