Rising Inflation and Weakening Jobs Market Put Fed in a Tight Spot Ahead of September Rate Cut US consumer prices surged in August, adding to concerns that the economy is edging closer to stagflation, even as the labour market shows signs of strain. According to the Bureau of Labor Statisticsʼ Consumer Price Index CPI) report released on Thursday, September 11, headline inflation rose 0.4 percent month-over-month and 2.9 percent year-over-year—the steepest increase since January.
Figure 5.Monthly Percent Change in Consumer Price Index Source: Bureau of Labor Statistics) The jump was broad-based: housing costs advanced 0.4 percent, while food rose 0.5 percent, with supermarket prices climbing 0.6 percent. Fresh produce saw a 1.6 percent increase. Coffee prices also spiked by more than 20 percent compared to a year ago. Much of this was attributed to tariffs, farm labour shortages, and weather disruptions. Energy costs rose 0.7 percent, with gasoline up 1.9 percent. Core inflation, which strips out food and energy, also advanced by 0.3 percent in August and 3.1 percent annually, showing sticky price pressures in services such as airline fares, which jumped 5.9 percent, and rents, which rose 0.4 percent. Tariff-related increases extended to goods like motor vehicles, apparel, and furnishings.