US inflation data rises, Federal Reserve's rate cut decision remains unchanged

Recent US inflation data release has sparked widespread market attention. According to Jin10 reports, the US August Consumer Price Index (CPI) increased more than expected, with an annual rise of 2.9%, reaching a seven-month high and significantly accelerating from July’s 2.7% increase. This data has caused some market participants to worry about the inflation outlook in the US, but industry consensus believes that these figures are unlikely to change the Federal Reserve’s established interest rate cut plans for now.

CPI Increase Exceeds Expectations, Reaching Seven-Month High

Regarding the details, US August CPI, after excluding base effects, rose 0.4% month-over-month, higher than July’s 0.2% increase. This accelerating trend has resulted in a total increase of 2.9% over the past 12 months, the largest rise this year. Notably, US inflation data, after a slight uptick in July, accelerated again in August, which may trigger market concerns about stagflation (slowing economic growth but rising prices).

Weak Employment as the Main Reason for Rate Cuts, Inflation Fears Cannot Halt Policy

Although US inflation has recently picked up, the Federal Reserve still plans to announce a rate cut next week. This seemingly contradictory policy stance actually reflects the central bank’s concerns about the current state of the labor market. Recent employment data has been weak, making it a priority for the Fed, enough to offset policy concerns caused by rising prices. In balancing economic growth and price stability, the central bank currently leans toward giving greater weight to employment protection.

Tariff Effects Gradually Manifest, Future Prices Face Upward Pressure

Looking ahead, US inflation faces new sources of pressure. The comprehensive tariff policies implemented by President Trump are gradually impacting prices. Although this effect is currently being transmitted gradually, as corporate inventories before tariffs are depleted, the risk of accelerated price increases in the coming months is building. Business survey data continue to indicate that more tariff-related inflation is imminent.

Stephen Stanley, Chief US Economist at Santander Bank Capital Markets, pointed out: “There are many signs that tariff-related inflation effects are imminent, although it may take several months for them to fully transmit to the price system.” This assessment suggests that upward inflation pressures in the US may persist for some time, posing a complex challenge for policymakers in managing inflation expectations.