Inflation Surges in August, but Fed Poised to Cut Rates

According to the latest economic reports, inflation in the United States is set to accelerate further in August 2025. The Bureau of Labor Statistics is scheduled to release the producer price index on Wednesday, followed by the closely watched consumer price index the next day.

Economists predict that both the headline and core inflation measures will increase by 0.3% during the month. This would push the annual headline CPI rate to 2.9%, the highest level since January, and further from the Federal Reserve's 2% target.

Despite the uptick in inflation, the central bank is still expected to reduce its benchmark interest rate at its meeting next week. Two key factors are likely to influence the Fed's decision: First, the core inflation rate, which excludes volatile food and energy prices, is predicted to remain unchanged at 3.1%. Second, the rise in prices is largely attributed to tariff-sensitive goods rather than services, which have a broader impact on the $30 trillion U.S. economy.

Policymakers are expected to look past the inflation increase and focus more on the increasingly weak job market, which could benefit from lower interest rates. The Fed has maintained that the recent price hikes are one-off events and are not likely to cause longer-lasting inflation.