The Consumer Price Index rose 2.9% on an annual basis in August, the fastest increase in the pace of an inflation since January, according to U.S. Labor Department data released on Thursday.
Core inflation, which strips out more volatile food and energy prices, was up 3.1% over the 12-month period that ended in August. The cost of auto repairs (+15%), used cars and trucks (+6%), medical care services (+4.2%), shelter (+3.6%), and transportation services (+3.5%) were among the highest annual increases in non-food and energy commodities.
The all-items index, which includes food and energy costs, rose 2.9% over the past 12 months with large increases for 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%). One bright spot is that gasoline prices have decreased (-6.6%) since August 2024.
At the supermarket, some of the highest increases between August 2024 and August 2025 were for roasted coffee (+21.7%), eggs (+10.9%), apples (+9.6%), meats (7.8%), and bananas (+6.6%). In some cases, such as coffee, new tariffs levied on imports from other countries appear to be playing a role in the price increases.
Viewed on a monthly basis, the all-items CPI increased by 0.4% in August, compared to the 0.2% increase that occurred in July and the 0.3% increase in June. Some of the largest month-over-month increases between July and August were for sewing machines and fabrics (+9.1%) jewelry (+6.8%), airline fares (+5.9%), motor vehicle repairs (+5.0%), instant coffee (4.9%), tomatoes (+4.5%), and public transportation (+3.6%).
The latest inflation data will play a key role in the Federal Reserve Board’s decision on whether to lower interest rates when its Federal Open Market Committee meets Sept. 16-17. Although inflation usually prompts the Fed to raise interest rates to slow spending and curb prices, the CPI report is being overshadowed by weak jobs reports of late that show a slowdown in hiring and rising unemployment.
The CME FedWatch puts the probability of a quarter percentage point cut in interest rates at 92.9% and a half percentage point cut in interest rates at 7.1%.
After the August CPI report was released, stocks were trading higher as investors apparently found nothing in the data that would derail the anticipated cut in interest rates.
