US CPI forecast upward, despite inflation concerns, Fed's interest rate cut outlook remains intact

According to a PANews report on September 11, the US Consumer Price Index (CPI) rose in August, surpassing market expectations. The annual inflation rate showed the fastest increase in seven months. Nevertheless, weakened signals in the labor market are not expected to prevent the Federal Reserve from deciding on a rate cut next week.

August Price Index Exceeds Expectations with a Rise

The data released on Thursday clarifies the situation. The CPI increased by 0.4% in August, following a 0.2% monthly rise in July. More notably, on an annual basis, the CPI accelerated from a 2.7% increase in July to 2.9%, the largest since January. These upward revisions to the inflation index have had a significant impact on the market.

Weakened Labor Market and Its Impact on Fed Policy Decisions

Recent signals of a weakening labor market continue to emerge. In this context, strong CPI data could amplify concerns about stagflation and inflation during an economic slowdown. However, since labor market weakness indicates broader economic vulnerabilities, the Federal Reserve is still likely to pursue a policy shift toward rate cuts.

Tariff Impact and Concerns Over Accelerating Future Inflation

The effects of President Trump’s comprehensive tariff policies are expected to unfold gradually. The key factor is timing. Since companies have already depleted inventories before tariffs were imposed, there is a high likelihood that inflationary pressures will intensify over the coming months.

Survey data from companies have suggested that price increases are imminent. Steven Stanly, Chief Economist for U.S. Capital Markets at Santander Bank, stated, “There is ample evidence that tariff-related inflation will occur further, but full ripple effects may take several months,” emphasizing that inflation will likely rise gradually for the time being. Ultimately, the US CPI outlook will continue to be a closely watched indicator.