The Bureau of Labor Statistics has released the August 2025 CPI data. CPI inflation data show U.S. retail prices rose more than forecast in August.
The US annual inflation rate accelerated to 2.9% in August 2025, the highest since January, after holding at 2.7% in both June and July, in line with market expectations.
On a monthly basis, the CPI went up 0.4%, higher than 0.2% in July and the forecast of 0.3%. Core inflation, which excludes food and energy, remained steady at 3.1%, the same as in July and at February’s peak, while core CPI rose 0.3% month-on-month, matching July’s pace and market forecasts.
“In today’s numbers, we are seeing some impact from tariffs, especially with higher prices on cars and clothes. The hot inflation print will not likely change the Fed’s plan to cut rates in September, but the Fed may hold in October if inflation expectations no longer look well-contained,” says Jeffrey Roach, Chief Economist for LPL Financial.
The all-items index rose 2.9 percent for the 12 months ending August, after rising 2.7 percent over the 12 months ending July. The all items less food and energy index or the core inflation index, rose 3.1 percent over the last 12 months.
“The Fed may still cut, but this data argues for a gradual path, not an aggressive pivot”, says Gina Bolvin, President of Bolvin Wealth Management Group.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent on a seasonally adjusted basis in August, after rising 0.2 percent in July. The index for all items less food and energy rose 0.3 percent in August, as it did in July.
Core consumer prices in the US, which exclude food and energy, rose by 0.3% from the previous month in August of 2025, the same pace as in July, in line with market forecasts. Indexes that increased over the month include airline fares, used cars and trucks, apparel, and new vehicles. The indexes for medical care, recreation, and communication were among the few major indexes that decreased in August.
“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,” says Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.
In the Jobs market data, initial jobless claims in the US surged by 27,000 from the previous week to 263,000 on the first week of September, the most in a single week since October 2021, and well above the market consensus of 235,000 initial claims. The result aligned with a series of pessimistic labor market surveys released since the start of the month to consolidate the evidence of a deteriorating labor backdrop in the US.
“Jobless claims were also much higher than expected, which gives weight to the other side of the Fed’s mandate. The weaker the labor market gets, the less inflation matters. It’s a balancing act, and the scales are tipping more toward full employment versus price stability. That’s especially true after this week’s big downward revisions of the annual employment and last week’s poor non-farm payrolls report,” says David Russell, Global Head of Market Strategy at TradeStation, an online brokerage firm.
US CPI Data July
In July, the annual US CPI remained steady at 2.7% compared to June numbers. On a month-on-month basis, it showed a decline from 0.3% to 0.2%. However, the core inflation index, which tracks all items less food and energy, rose 3.1 percent over the last 12 months, higher than June’s 3% rise. On a month-on-month basis, the Core inflation increased to 0.3 percent in July, up from 0.2 percent in June.
US Fed FOMC Meeting
The US CPI data for August holds significant importance as the US Federal Open Market Committee (FOMC) members are scheduled to meet on September 16-17 to determine interest rates.
The decision on whether Federal Reserve Chair Powell will implement a rate cut or maintain the current rate status will be announced on Wednesday, September 17.
The September FOMC meeting also holds significance as the meeting is associated with the release of a Summary of Economic Projections. What it will reveal is the ‘dot plot’ showing by how much and how many rate cuts can be expected by the US Fed.
US stock futures were flat on Thursday as investors awaited the August consumer inflation report. Now, it remains to be seen how the stock market reacts to the US CPI data for August.