August inflation ticks up, jobless claims surge
By: Andrea Riquler
USA today
..... U.S. inflation accelerated modestly in August, [2025] offering some leeway for the Federal Reserve to cut interest rates at its September [2025] meeting.
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Consumer prices rose an annual 2.9% in August, [2205] the Labor Department said on September 11, [2025] up from 2.7% annual increase in July. [2025] But a reading of "core inflation," which ignores more volatile categories of spending, stripping out food and energy items, was at 3.1% for the second month in a row.
..... Both readings matched the consensus forecast from economists surveyed by Bloomberg, and come on the heels of reports that suggest the labor market is weaker than many expects previously believed.
..... As long as inflation remains tame, the central bank has the option of cutting rates to try to boost demand - and hiring - in the economy. As of September 10, [2025] trades saw a 100% chance of rate cuts when the Fed meets September 17, [2025]
with 90% expecting one 25-basis point cut and 10% forecasting two, according to the CME FedWatch tool.
..... Bets also rose on the prospect the Fed would deliver a fourth consecutive rate cut in January, [2026] with the odds on approaching 50%, up from less than 40% before the data on September 11. [2025]
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In a separate release out September 11, [2025] the Labor Department said first time unemployment claims had surged to a 4-eayr high. Some 263,000 Americans filed for jobless benefits in the week ending September 6. [2025]
..... "Right now, inflation is a key subplot, but the labor market is still the main story." said Ellen Zentner, Che if Economic Strategist for Morgan Stanley Wealth Management, in a note to clients. "That translates into a rate cut next week - and likely, more to come."
..... The stock market has rallied in recent days as fresh economic data has spurred investors other consider their forecasts.
..... The S&P 500 and Nasdaq closed at record highs on September 10 [2025] after a report showed cooler producer prices.
..... Even if inflation remains mild, it's still well above the 2% target that the Fed sets for itself. And more importantly, between somewhat-high consumer prices and an iffy job market, many Americans continue to feel pinched.
..... Car repossessions are at the highest since 2009, fast food is so expensive that consumers are cutting back on their dining habits, and the effect of tariffs on coffee has pushed that commodity to nearly double in price in just five years.
..... Meanwhile, a closely-watched survey from the New York Fed released September 8 [2025] showed that respondents saw only a 44.9% probability of finding a new job if they lost their current one, the lowest reading on record back to 2013.
..... The complicated economic picture may also make financial markets more volatile, said Chris Zaccarelli, chief Investment Officer for Charlotte, North Carolina-based Northlight Asset Management in an analysis emailed after the morning's release.
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"The last bolt on the gate has fallen out and the rate cutting horse is about to leave the barn,' Zaccarelli said. "the Fed's path is clear in the short run, but over the medium term the fact that core inflation is running quite a bit higher on a month-over-month basis is going to complicate matters and the market knows this."
..... Contributing: Reuters