Cost of Food and Housing Contributes to Inflation Upturn in August

The price of goods and services paid by U.S. consumers rose in August, a month when President Trump raised tariffs on goods from many U.S. trading partners. Overall price increases were largely due the cost of housing and food products. The U.S. inflation rate rose 2.9% in the year-ending August, according to the Consumer Price Index (CPI) for All Urban Consumers measured by the Bureau of Labor Statistics. That was up from the 2.7% annual inflation rate the previous month and it was the fastest pace since January. The Fed’s current target rate for inflation is 2%. Keeping the overall inflation rate elevated were the costs for food and shelter, which rose 3.2% and 3.6%, respectively, during the year-ending August. The rise in the cost of food was the highest since October 2023, while the rise in the cost of shelter was the lowest increase in nearly four years. It should be noted that the shelter index has a well-documented lag effect. Excluding the cost of food and shelter, consumer prices were up 2.3% year-over-year in August, up from the annual rate of 2% in July. Other notable increases were seen in the cost of used cars and trucks, which rose 6% in the year-ending August and airline fares, which were up 3.3% year-over-year.