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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.

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.