In August, U.S. inflation increased as expected, with core CPI up 0.3% and overall CPI up 0.4%, driven by higher prices for cars, apparel, and appliances. The Federal Reserve is expected to cut interest rates at next week’s meeting, despite persistent inflationary pressures. Trump’s global tariffs may have influenced some price increases, but service sector costs, such as travel, played a larger role. The market expects up to three rate cuts this year, with the Fed facing challenges from sticky service prices and rising jobless claims.

The Fed’s decision on rate cuts will need to balance relief against ongoing cost pressures, with stocks and Treasuries reacting positively to the news. Investors are watching closely to see how long elevated services inflation will last and whether rate cuts will reignite price pressures. Trump’s tariffs add complexity to the inflation picture, potentially impacting global trade flows and economic stability.

Read more at Quiver Quantitative: US Core CPI Rises, Fed on Track for Rate Cut