Prices rose 0.4% in August, which was roughly consistent with expectations and allowed the Fed to gradually lower interest rates, the federal government said in a report Thursday.
The Bureau of Labor Statistics said the consumer price index rose 2.9% each year, slightly higher than the July reading.
The monthly gains of the Consumer Price Index are slightly higher than Wall Street’s estimate of 0.3%.
However, core inflation readings that subtract energy and food prices grew by 0.3% per month to 3.1% in 12 months, making it consistent with the forecast.
BLS said rising housing prices were the main factor in the increase, and the healthcare, entertainment and communication index was “one of the few major indexes that fell in August”.
On Wednesday, the producer price index showed wholesale prices fell 0.1% in August, beating Wall Street forecasts and raising expectations for lower tax rates when the Fed meets next week.
The rise in CPI complicates this photo, but the central bank will still lower the fees due to a significant slowdown in recruitment.
Stocks soared after the CPI report as investors bet the Fed lowers interest rates by at least 25 basis points, or 0.25%, next week.
President Trump said the Fed should take action as soon as possible to lower interest rates.
But the Fed is reluctant to cut it because it is concerned about inflationary pressures created by Mr. Trump’s trade agenda.
Inflation remains modest compared to the apocalyptic forecast earlier this year, which led Mr. Trump to praise a positive trade agenda that includes a 10% tariff on all imported blankets and taxes on dozens of trading partners.
In the late summer, the president’s tariff ranged from 15% to 41% on more than 67 countries, raising the tax to its highest level for more than a century. He consolidated the 10% blanket tariff on all imports and is implementing a 15% tax rate he negotiated with places like the EU, Japan and South Korea.
Mr. Trump said his approach would force companies to produce products in the United States and bring billions of dollars in revenue to the U.S. government.
Still, Democratic lawmakers and some economists say tariffs appear to hit Americans in the fence.
Heather Long, chief economist at Naval Federal Credit Union, said inflation in August reached 2.9%, or “the highest since January and an increase of 2.3% in April.”
“The middle class squeeze of tariffs is here. It’s disturbing that many basic necessities are rising again: the cost of food, gasoline, clothing and shelter in August has increased dramatically.”
Rep. Brendan Boyle, Pennsylvania, is the highest Democrat on the House Budget Committee, calling Mr. Trump a “scammer.”
“He promised to lower prices, but his reckless policies kept pushing them higher,” Boyle said. “The only promise he kept was to give his billionaire companions – everyone else paid the price.”
