#MacroFriday: Inflation in the US

This week’s MacroFriday takes another look across the Atlantic, focusing on the second pillar of the Fed’s dual mandate: inflation. While labour market conditions continue to cool, yesterday’s Initial Jobless Claims rose to their highest level since October 2021, consumer prices in the US are heating up again.

Yesterday’s release of the Consumer Price Index (CPI) brought few surprises. Headline CPI in August climbed to 2.9% year-over-year (0.4% month-over-month), edging closer to January’s peak of 3%. Since April’s low of 2.3%, inflation has been steadily creeping higher. The effects of tariffs on consumer prices appear to be filtering into consumer prices only gradually. Despite a sharp rise in reported input costs for both manufacturing and non-manufacturing firms since April, companies appear to be cautious in passing on higher costs to consumers. Nonetheless, inflation in the US is likely to rise further in the coming months as cost pressures continue to drive prices upward.

Meanwhile, the ECB held its main policy rate steady. Inflation in 2025 is projected to hover around 2%, while economic growth in the Euro Area was revised upward to 1.2% for 2025. Next week, attention turns to the Federal Reserve’s interest rate decision, where markets now widely expect a 25 basis point cut.