US Inflation Hits Highest August Rate Since January Amid Rising Food, Housing Costs

Consumer inflation in the United States rose to its highest level since January 2025, with the Consumer Price Index (CPI) increasing 2.9% year-over-year in August and monthly inflation rising 0.4%, driven by higher costs for essentials such as housing, groceries, gas, airfare, and apparel. Core inflation, which excludes food and energy, also rose by 3.1% annually, exceeding the Federal Reserve's 2% target. Despite a weakening labor market with slowing hiring and rising unemployment claims, demand for discretionary services remains strong, contributing to concerns about stagflation—a combination of persistent inflation and economic stagnation. The Federal Reserve is under pressure from President Donald Trump to cut interest rates, with markets widely expecting a 25 basis point cut at the upcoming September meeting, although some economists urge caution given inflationary pressures. Rising tariffs imposed under Trump's administration are considered a significant factor pushing up consumer prices, leading to debates over whether these price increases are temporary or will persist. The elevated inflation amid a softer job market poses a challenging scenario for Federal Reserve policymakers balancing inflation control against supporting economic growth.