US Inflation Watch August 2025- Highlights

• Core CPI rose at the fastest pace since January, but with tariffs yet to fully filter through, further price pressures are likely even as the Fed readies a September cut.

• PPI saw the sharpest rise in three years, signalling that firms have been absorbing much of the tariff costs.
• Retailers are beginning to pass on additional costs to consumers, raising questions about whether tariffs will be a one-time price shock or a persistent inflation driver.
• Job creation has fallen in 2025, and the weakening labour market is facing increased downside risks. Balance in the labour market is critical to the Fed’s logic behind tariffs being a one-time price shock.
• The Treasury has begun rebuilding its General Account after the latest debt ceiling resolution, contributing to tighter lending standards by pulling liquidity out of markets through heavy bill issuance.
• Fed Funds Futures turned more dovish as moderating inflation data points to a 25bps cut in September. Further cuts are expected in 2026 as Trump continues to erode Fed independence.

The newsletter presents 20 charts comprising 23 key inflation indicators grouped into five categories of economic data.

US Inflation Report August 2025