(TNND) — The rate of inflation accelerated last month as the baseline inflation measure inched closer to the 3% mark, which it hadn’t reached since the start of the year.
So-called core inflation, which strips away volatile food and energy prices, was above the 3% mark for the second straight month.
The Labor Department released the August consumer price index on Thursday morning. The popular measure of inflation was forecasted to increase 0.3% from the previous month but instead rose 0.4%.
The yearly rate of inflation hit 2.9% in August after back-to-back months of 2.7%.
The annual rate of inflation was as low as 2.3% as recently as April but has since retreated from the Federal Reserve’s target of 2% inflation.
Colorado State University economist Stephan Weiler told The National News Desk last week that he expects an interest rate cut at the Fed’s upcoming meeting.
The Fed raised its benchmark rate 11 times beginning in early 2022 as a lever to tame inflation, which peaked at 9.1% in June 2022.
But a cooling jobs market likely will have the Fed cutting rates to boost employment, despite rising prices.
The last rate cut was in December.
The shelter index rose 0.4% in August’s CPI and was the largest factor in the monthly increase.
Food prices rose half a percentage point between July and August after being flat the month before.
And energy prices increased 0.7% after falling the previous month.
Bankrate Financial Analyst Stephen Kates said the latest inflation report showed “the precarious position the U.S. economy finds itself in after months of trade disruptions.”
President Donald Trump has increased tariffs on dozens of countries with the aim of generating revenue and reshoring manufacturing, among other goals.
But economists expect the higher tariffs to lead to higher prices for American consumers.
The Yale Budget Lab said the effective tariff rate has increased from 2.4% at the start of the year to 17.4% now.
It’s now the highest since 1935.
“Concerns over stagflation, marked by rising prices amid weakening economic growth, are likely to intensify as the Federal Reserve weighs its next move,” Kates said via email. “The Fed’s dual mandate of stable prices and full employment remains firmly at odds, limiting their policy flexibility in 2025. Even if the committee decides to cut rates, it will likely reflect a surrender to economic weakness rather than a clear win over inflation.”