As the U.S. economy continues to navigate an unpredictable post-pandemic landscape, the latest inflation data has sparked renewed debate among economists, financial analysts, and industry leaders.
Based on the latest data, industry experts have shared their insight and what this means going forward.
Nathaniel Casey, Investment Strategist at Evelyn Partners, comments:
“August’s inflation report came in slightly stronger than expected with a 0.4% month-on-month print, pushing the annual rate to 2.9%. Much of this strength came from energy, with gasoline prices rising during August. Core inflation remained unchanged at 3.1%.
We continue to see evidence of tariff impacts creeping in the inflation data, with the core goods inflation accelerating from 0.3% year-on-year in May to 1.5% year-on-year in August. Within this, the basket for Apparel (an import sensitive segment) accelerated by 0.5% month-on-month in August, its highest rate since February.
While the full impact of tariffs remains uncertain and inflation appears to be edging higher, the Federal Reserve is likely to view this as less concerning than the recent signs of softness in the labour market, as reflected in the payrolls data. Against this backdrop, we expect the Fed to resume its interest rate cutting cycle at the September Federal Open Market Committee meeting next week.”
Garry White, Chief Investment Commentator at Charles Stanley said:
“CPI data was in line with market forecasts – so it looks all systems go for the Federal Reserve’s first interest rate cut of 2025 next week. Heavily trailed – including by Federal Reserve Chair Jerome Powell at the central bankers’ symposium at Jackson Hole – investors will be scrutinising the accompanying statement to discern what will happen next. President Trump would like to see a series of steep rate cuts. Unfortunately, with inflation stubborn and the full impact of tariffs not yet felt, the president is unlikely to get what he wants. So, we can expect more attacks on the US central bank in the coming months as President Trump tries to recast it in his favour.”
Chris Beauchamp, Chief Market Analyst at IG comments:
“Quite how hot a CPI we would have needed today to deter a Fed move next week is now an academic question. The data is clear, a weakening picture in employment means the Fed has to push on with easing even with inflation fears still lurking. Today’s unemployment number should be the big driver, since weekly claims hit their highest level in 2 years. Perhaps Powell will be privately glad that he has such cover, since it helps allay concerns that the Fed has buckled under White House pressure.”
Richard Flax, Chief Investment Officer at Moneyfarm comments:
“US CPI data came in as expected with headline inflation rising to 2.9% year on year, the highest since January. Core inflation held steady at 3.1%, underscoring how underlying pressures remain sticky. There’s a lot of focus on goods inflation, given all the news around tariffs, but it’s worth noting that services inflation remains elevated, with prices in services ex-energy rising 3.6% year on year.
Despite inflation running above the Feds 2% target, last week’s weaker than expected non-farm payroll figures, coupled with revised data showing 911,000 fewer jobs created in the twelve months to March, have strengthened the likelihood of monetary policy easing. We expect the Federal Reserve to cut its policy rate by 25 bps at its September meeting”.
George Lagarias, Chief Economist at Forvis Mazars comments:
“US inflation climbed to 2.9%. All components, including energy, climbed simultaneously for the first time since February 2023. Luckily for the Fed, and its newfound dovishness, the data left an important morsel: average hourly and weekly earnings dipped significantly. The data reads both ways: rising goods and services inflation yet labour market weakness, which can suggest that the pressures might be temporary. While inflation is climbing, we don’t think it is happening in a convincing enough way to deter rate cuts at year end. But we could see a possibility that it might be less than the three currently suggested by markets.”
Katy Stoves, Investment Manager at Mattioli Woods comments:
“US CPI has continued its march higher reaching 2.9% on an annual basis in August, up from July’s 2.7% reading. The monthly increase of 0.4% came in marginally ahead of economists’ expectations of 0.3% and signals growing pressure on US consumers as the effects of recent tariff policies begin to materialise.
With buffer inventories that had been built ahead of tariffs being depleted, businesses are now forced to replenish stock at elevated prices. With the tariffs looking to be more permanent, companies now have cover to pass these rising costs onto consumers, rather than compressing margins.
Whilst some had anticipated tariffs would create a one-off price adjustment, the data increasingly suggests this may be a more prolonged process with peak effects still to come.
Despite the modest inflation uptick, market expectations remain anchored around a 0.25% rate cut next week, reflecting the Fed’s continued concern over employment trends. However, a more aggressive 0.5% “mega cut” remains unlikely.
The unemployment rate remains at historically low levels, providing the Fed with some justification for a measured approach. Yet policymakers face the challenge of supporting a cooling labour market without allowing inflation expectations to become unanchored from their 2% target.”
