-  Inflation remains elevated in August
-  Shelter costs largest driver of price growth
-  Tariff impact remains modest—for now
-  Jobless claims hit highest level since 2021
-  Fed to restart easing cycle next week

By Harry Daniels
LiveSquawk News
@HarryDaniels71

11 September 2025 | 15:00 GMT

US economic reports released Thursday did little to change the likely trajectory of the country’s interest rate policy next week, with labour data highlighting an ever-looser jobs market, whilst the national inflation gauge remained elevated last month.   

Monthly headline inflation rose 0.4% in August, a tenth of a percentage point faster than forecast and above July’s 0.2% reading. The unrounded read was 0.382% versus 0.197%. Core CPI, which excludes food and energy, increased 0.3% to match both the forecast and prior value, 0.345% unrounded up from 0.322%. On an annual basis, the headline rate rose an in-line 2.9%, two-tenths higher than last month. Core prices increased 3.1%, mirroring the estimate and July's figure.  

The Bureau of Labor Statistics said the most significant driver of the monthly rise was shelter costs, which rose 0.4% in August. Food was another notable gainer, with all six major grocery store food group indices higher in August. Energy was up 0.7%, rebounding from a 1.1% fall last month.  

Within the core basket, statisticians said sectors that increased over the month include airline fares, used cars and trucks, apparel, and new vehicles. These areas were partially offset by a fall in medical care, recreation, and communication. 

Owners' equivalent rent rose 0.4% in August, and the index for rent increased 0.3%. 

JP Morgan’s Michael Hanson noted that CPI firmed broadly as expected, highlighting the acceleration in core services. He added that core goods continued to show a still modest effect from duty taxes introduced by US President Donald Trump in April.  

“Tariff pass-through into consumer prices is ongoing but still fairly moderate; a combination of anecdotal evidence (including firms’ own guidance) and survey data suggests further increases are likely, although perhaps somewhat more gradually than previously thought.” 

In truth, many analysts already expected the effects of the trade war to become more pronounced around September to October.

Released alongside the inflation data, the latest weekly jobless claims revealed further deterioration in the labour market.

Initial claims rose to 263,000—the highest level in nearly four years—well above both the consensus estimate of 235,000 and the prior week’s revised figure of 236,000.

Kathy Bostjancic, chief economist at Nationwide, said the sharp rise “underscores that the labour market is losing steam and reinforces that the Fed needs to start cutting rates next week. It will likely mark the beginning of a series of rate reductions.”

The Federal Open Market Committee (FOMC) is widely expected to announce a 25-basis point rate cut next week. More significantly, Fed Chair Jerome Powell is anticipated to signal a willingness to further ease through the remainder of the year and beyond.

JP Morgan’s Hanson remarked, While elevated inflation likely remains a concern for a number of Fed officials, this week's inflation releases do not make a compelling case for more hawkishly inclined members to cast a dissenting vote on the FOMC against our expectation for a 25bp rate cut next week.”

Nationwide’s Bostjancic went further in her outlook: “We remain of the view that the Fed will cut the funds rate by 75bps by year-end but that the FOMC will likely start conservatively with a 25-bps rate cut, especially given the uptick in inflation. However, the weakening in the labour market does open the possibility of a 50bps rate cut at one of the three remaining policy meetings of the year.”