Persistent price pressures may impact consumer spending and raise questions about future Federal Reserve interest rate policies.
Photo: Al Drago
Key Takeaways
- US inflation rose to 2.9% in August 2025, its highest point since January 2025.
- The rate surpasses the Federal Reserve’s target and could influence interest rate decisions.
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US inflation climbed to 2.9% in August 2025, reaching its highest level since January of the same year, according to Consumer Price Index data released today.
The increase follows two months of steady 2.9% readings in June and July 2025, matching economists’ expectations of accelerating price growth.
The current rate exceeds the Federal Reserve’s 2% long-term inflation target, highlighting ongoing challenges in price stabilization after inflation peaked above 9% in 2022.
While US inflation maintained an average of 2.5% annually from 2010 to 2020, the early 2020s saw a surge driven by supply chain disruptions and stimulus spending. The latest reading mirrors levels observed in early 2025, suggesting persistent inflationary pressures.
The S&P 500 has historically dropped between 1% and 2% on days when inflation data exceeds expectations, as markets price in potential monetary policy tightening.
The elevated inflation rate indicates faster price increases for consumer goods and services compared to recent months, potentially affecting household spending and the Federal Reserve’s interest rate decisions.
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