U.S. Inflation Hits Highest Level Since January as Fed Weighs Rate Cut

U.S. consumer prices accelerated in August, marking their fastest rise since January, according to government figures released Thursday (September 11). The jump underscores mounting cost-of-living pressures for American households as President Donald Trump’s renewed tariffs ripple through the economy. Despite the uptick, analysts still anticipate that the Federal Reserve will move ahead with an interest rate cut next week.

CPI Data Shows Broadening Price Pressures

The Labor Department reported that the Consumer Price Index (CPI) increased 2.9% year-over-year in August, up from 2.7% in July and in line with economists’ expectations. On a monthly basis, prices rose 0.4%, double July’s pace.

Core inflation, which excludes volatile food and energy categories, surged 3.1% compared with the same month last year. Economists say this indicates that price pressures are broadening beyond commodities and energy, reflecting higher costs across a range of goods and services.

The Tariff Effect

The latest inflation spike comes against the backdrop of Trump’s aggressive trade policies. Since returning to the White House in January, he has reimposed a 10% tariff on imports from most U.S. trading partners, while also enforcing steep duties on steel, autos, and other key sectors.

Economists caution that the full impact on consumers may take time to materialize. As retailers and manufacturers restock inventory at higher import prices, more households will feel the squeeze in coming months. Everyday items from coffee to furniture are already seeing sharp price hikes, adding strain on middle-class families.

Market Expectations and Fed Outlook

Despite rising prices, financial markets broadly expect the Fed to proceed with a 25 basis point rate cut at its September 16–17 policy meeting. This would mark the first reduction in borrowing costs since December 2024. Analysts argue that the Fed is attempting to balance short-term inflationary spikes with growing evidence of a cooling economy.

The International Monetary Fund (IMF) has also highlighted signs of weakening demand and slowing job creation, suggesting the Fed has “room to support growth” by lowering rates.

The Middle-Class Squeeze

For many households, the pain is already evident. Heather Long of Navy Federal Credit Union described the situation as “the middle-class squeeze from tariffs,” pointing to sharp annual price jumps in consumer goods: coffee up 21%, audio equipment up 12%, and furniture up 10%.

Meanwhile, rising food, energy, and housing costs are further stretching budgets, intensifying frustration among working families. These pressures could carry political ramifications as Trump’s tariff strategy collides with voters’ everyday economic realities.