U.S. Inflation Accelerates to 2.9% in August 2025
In August 2025, the U.S. Consumer Price Index (CPI) accelerated compared to the prior month, with the Bureau of Labor Statistics (BLS) reporting a 0.4% month-on-month increase in the headline CPI.
The inflation rate accelerated faster versus +0.2% surge in July, pushing the annual rate up to 2.9% from 2.7%. The slight uptick was largely driven by higher shelter costs alongside energy.
According to statistics data, Core CPI, which excludes food and energy, rose 0.3% month-on-month, matching July’s pace, keeping the annual rate at 3.1%.
The increase was supported by higher costs in airline fares, used cars and trucks, apparel, and new vehicles. Offsetting this, indexes for medical care, recreation, and communication declined modestly.
The energy index rose 0.7%, reflecting a 1.9% rise in gasoline, while the food index climbed 0.5%, with food at home (+0.6%) and food away from home (+0.3%) both advancing.
Within groceries, fruits and vegetables jumped 1.6% (tomatoes +4.5%, apples +3.5%), while beef rose 2.7% in August.
Overall, the annual rate of food settled at 3.2%. Despite the rise in headline inflation, market remain highly confident of a rate cut next week as Fed Chair Jerome Powell recently signalled the possibility of easing, citing increasing risks in the labour market while warning that inflation remains elevated.
The CME FedWatch tool still leans heavily (88.9% as of 11th September 2025) toward a 25bps cut. So far, the capital market has reacted modestly positive to the CPI data.
The S&P 500, Dow Jones, and Nasdaq traded higher while yields on treasuries eased, following the inflation report as investors priced in expectations of a Fed rate cut, amid weaker job market.
AAG Capital Limited opines the Federal Reserve is likely to proceed with a modest 25bps rate cut next week but will remain cautious about further easing until more durable evidence of inflation cooling appears. British Pound Trades Calm at $1.3520 Ahead UK GDP Data
