US consumer inflation rises 2.9%, highest in seven months

New York (TIP)- US consumer inflation rose to its highest this year after January, government data showed on Thursday, Sept 11. The US consumer inflation, highest in seven months, rose more than what was expected by analysts. The US Consumer Price Index shot up by 2.9 per cent in August, data showed. This is a 0.2 per cent increase from July, when inflation rose 2.7 per cent year-on-year.
According to a poll by Reuters, economists had predicted that US August inflation would rise 0.3 per cent and increase 2.9 per cent on a year-over-year basis.
The inflation was high because the prices of gas, groceries, hotel rooms and airfare shot up, along with the cost of clothes and used cars.
As per data from the Labour Department core prices increased by 3.1 per cent excluding the volatile food and energy categories.
Both these numbers are higher than the US Federal Reserve’s inflation target of 2 per cent.
In the 12 months through August, the so-called core CPI inflation increased 3.1 per cent. That followed a year-on-year rise of 3.1 per cent in July.
The pass-through from President Donald Trump’s US tariffs has been gradual, but prices could accelerate in the months ahead as companies have now depleted their pre-tariff inventories. Business surveys have for some time been signalling imminent price increases.
“The evidence is overwhelming that more tariff-related inflation is coming, though it may still be several months before it passes through fully,” Stephen Stanley, chief economist at Santander US Capital Markets, told Reuters.
According to the news agency, the latest US CPI inflation data could give rise to concerns about stagflation following recent downbeat news on the labour market.
Markets set for muted open
Wall Street’s main indexes were set for a subdued open on Thursday, Sept 11, after the latest US consumer inflation data.
“Inflation is firming, not as much as we expected, but firming nonetheless … in a way, that the market can digest it,” Gary Schlossberg, global strategist at Wells Fargo Investment Institute, was quoted as saying by Reuters.
Will Fed cut rates now?
According to the report by Reuters, the US CPI data is not expected to prevent a much-anticipated interest rate cut from the Federal Reserve next week against the backdrop of labour market weakness.
The reading is the last data the Fed will receive before its key meeting next week, when policymakers are widely expected to cut their short-term rate to about 4.1 per cent from 4.3 per cent. Still, the figures underscore the challenges the Fed is facing as it experiences relentless pressure from President Donald Trump to cut rates.
Even as inflation has ticked higher, recent government reports have also shown that hiring has slowed sharply in recent months and was lower than previously estimated last year. The unemployment rate ticked up in August to a still-low 4.3 per cent. And weekly unemployment claims rose sharply last week, a sign layoffs may be picking up.