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Inflation Picks Up to 2.9% as Jobless Claims Jump, Keeping Fed on Track for a Small Cut

Markets largely see a 25-basis-point cut next week given growing signs of labor weakness.

Economists expect that inflation heated up in August in part because of businesses passing along higher costs they're seeing from tariffs and other policies.
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An employee holds U.S. dollar bank notes at a money changer in Jakarta, Indonesia, April 9, 2025. REUTERS/Willy Kurniawan/File Photo
Specialist traders work inside a booth on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., September 10, 2025. REUTERS/Brendan McDermid

Overview

  • The Consumer Price Index rose 0.4% in August and 2.9% year over year, with core CPI steady at 3.1% and up 0.3% on the month, according to the BLS.
  • Initial jobless claims climbed to 263,000 in the week ended Sept. 6, the highest since October 2021, underscoring a weakening labor market.
  • Futures imply a high probability of a quarter-point Fed cut next week with only a small chance of a half-point move, as stocks gained and 10-year yields hovered near 4%.
  • The producer price index fell month over month in August after July’s jump, offering a mixed signal on price pressures compared with the hotter CPI.
  • A preliminary benchmark revision showed 911,000 fewer jobs in the 12 months through March, and analysts say Trump’s tariffs are contributing to sticky goods inflation that complicates policy timing.