United States: Inflation Picks Up Slightly

Consumer price pressures intensified somewhat in August. In fact, the monthly increase of 0.4% was the highest since January 2025. The main contributors were higher food prices—particularly grocery items—and gasoline. Several factors are driving food inflation. While import tariffs may play a role, labour shortages in the agricultural sector due to restrictive immigration policies, rising feed costs, and declining livestock inventories (which are pushing up beef prices) are also contributing to the upward pressure.

Core CPI remained relatively stable on a monthly basis, but still elevated. Notably, prices for core goods excluding food and energy rose by 0.3%, the strongest monthly gain since January. This may be an early sign that tariffs are beginning to filter through to consumer prices. The 3‑month annualized change in core goods inflation rose to 2.8%, the fastest pace since June 2023. Upward pressure on goods prices is likely to persist in the coming months.

As for services excluding energy, growth slowed slightly to 0.3% in August from 0.4% in July. Nonetheless, housing costs and airfares accelerated. The three-month change in service prices also picked up.

Overall, inflation appears to be at a turning point. While some underlying stability remains, price pressures are becoming more pronounced in certain categories. The effects of tariffs and rising household inflation expectations may become more visible soon, especially as businesses’ ability to absorb cost increases is already being tested.

Inflation remains relatively high in the United States, posing a potential challenge for the Federal Reserve. However, there is still room to lower policy rates, particularly as labour market indicators continue to soften. This morning’s report showing a rise in initial jobless claims to 263,000—the highest since October 2021—supports that view.