August US Inflation Hits 2.9% Amid Rising Jobless Claims, Fed Rate Cut Expected

Inflation in the U.S. remained elevated in August 2025, with the Consumer Price Index rising 0.4% for the month and 2.9% year over year, slightly above expectations. The increase was driven by higher prices in goods affected by President Donald Trump’s tariffs, including household furnishings and cars, as well as rising food, energy, and shelter costs. Despite the persistent inflation, the labor market is weakening, evidenced by a spike in weekly jobless claims to the highest level in nearly four years and downward revisions to previous job growth figures. This mixed economic environment has led the Federal Reserve to widely anticipate a 25-basis-point interest rate cut at its September meeting, as policymakers try to balance inflation risks against labor market deterioration. Analysts caution that while tariffs continue to complicate inflation trends, the Fed must carefully navigate easing monetary policy without allowing inflation expectations to become unanchored. The interplay of tariff impacts, sticky inflation, and rising unemployment presents a complex challenge for the Fed’s dual mandate of fostering maximum employment and price stability.