Consumer prices rose 2.9% in August from a year earlier, marking the fastest increase since January, according to the Consumer Price Index (CPI) released by the Labor Department yesterday.
The price hikes hit cars, clothes, and groceries the most, with coffee prices up 21%, beef steaks 17% and apples 10%. Core inflation, which strips out food and energy, also rose 3.1%.
The price increases were expected as major retailers, including Walmart, Target, Best Buy, Hormel Foods, J.M. Smucker, and Ace Hardware, had already said that tariff-related cost increases would soon hit consumers.
Analysts believe more price hikes are on the way as stores run out of inventory they stocked up before President Donald Trump’s trade tariffs could hit.
For the Federal Reserve, the CPI data complicates an already delicate balancing act.
The labor market is cooling as jobless claims reached 263,000 last week, the highest since October 2021. It is raising fears that tariff-driven price hikes could collide with slowing employment. This could result in stagflation.
The Fed is still expected to cut rates by 0.25 percentage points next week, with markets betting on two more cuts this year.