The Consumer Price Index (CPI) increased by 2.9% in August compared to the previous year, according to data from the U.S. Labor Department. This marks the fastest annual rise in inflation since January.
Core inflation, which excludes food and energy prices, rose 3.1% over the 12 months ending in August. Notable increases were reported in auto repairs (15%), used cars and trucks (6%), medical care services (4.2%), shelter (3.6%), and transportation services (3.5%).
The overall index, including food and energy costs, also climbed 2.9% year-over-year. The largest increases were seen in piped gas service (13.8%), electricity (6.2%), paper products (4.5%), food eaten away from home (3.9%), and food consumed at home (2.7%). Gasoline prices declined by 6.6% since August 2024.
At grocery stores, roasted coffee prices jumped by 21.7%, eggs by 10.9%, apples by 9.6%, meats by 7.8%, and bananas by 6.6%. The report notes that tariffs on coffee imports have contributed to higher prices for that product.
On a month-to-month basis, the all-items CPI rose by 0.4% in August, following a 0.2% increase in July and a 0.3% rise in June. The largest monthly increases were for sewing machines and fabrics (9.1%), jewelry (6.8%), airline fares (5.9%), motor vehicle repairs (5%), instant coffee (4.9%), tomatoes (4.5%), and public transportation (3.6%).
The Federal Reserve Board is expected to consider this inflation data when its Federal Open Market Committee meets on September 16-17 to decide whether to lower interest rates, as high inflation typically leads the Fed to raise rates to slow spending and reduce price growth; however, recent weak jobs reports showing slower hiring and rising unemployment are also influencing their decision.
According to CME FedWatch, there is a 92.9% probability of a quarter-point interest rate cut at the next meeting, with only a 7.1% chance of a half-point cut: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
Following the release of the CPI report for August, stocks traded higher as investors appeared confident that an interest rate cut would proceed as anticipated.
