Core PCE inflation rises to 2.9% in August, remains above target

In August 2025, inflation rates in the United States showed a slight increase, leading to continued concerns about economic stability. The core personal consumption expenditures (PCE) price index, which excludes volatile food and energy prices, rose 2.9% on an annual basis. This figure was consistent with predictions made by economists and mirrored the 2.9% seen in July. Overall, the direct measure of inflation, the PCE itself, rose 2.7% in the same month, indicating a slight uptick from a 2.6% increase in July, marking the highest increase since February of that year. Despite these increases, inflation has moderated since its peak in 2022, a period during which the Federal Reserve raised interest rates 11 times in an attempt to combat rising prices. However, annual price increases have consistently remained above the Fed's 2% target, raising concerns among policymakers. A recent CBS News poll suggested that two-thirds of U.S. adults believe that prices continue to rise, and they anticipate that this trend will persist in the coming months. In light of the pressures on the economy, particularly due to higher prices affecting consumers, the Federal Reserve made the decision to reduce interest rates for the first time in 2025. This action was aimed at supporting a deteriorating job market. Members of the Fed are being cautious as they monitor effects stemming from tariffs imposed by former President Donald Trump, which have implications for inflation and the broader economy. Trump's public criticisms of the Fed's pace in lowering rates have further complicated matters, with calls for more aggressive cuts to interest rates. Looking ahead, expectations are building for further cuts at the next Federal Open Market Committee meeting scheduled for late October. This scenario highlights the ongoing struggle of the U.S. economy, balancing the challenges of inflation with efforts to stimulate growth. The resilience of U.S. consumer spending appeared, with inflation-adjusted consumer spending rising by 0.4% from July. However, the spending was primarily supported by higher income levels among wealthy households, revealing a disparity in how different income brackets are affected by inflation dynamics. Overall, the inflation narrative in the U.S. continues to evolve, with substantial implications for monetary policy and consumer confidence. As the Federal Reserve navigates these challenges, the balance between combating inflation and supporting economic growth will remain a focal point in discussions among policymakers and economists alike.