Inflation held at a 3.4% rate for the year ending in August, the Bureau of Labor Statistics reported Friday, adding to signs that price pressures may have topped out over the summer.
While it has improved in recent months, inflation is still too high for the Federal Reserve, which is expected to raise its interest rate target next week in an attempt to limit price pressures.
The burst of inflation that accompanied the conflict with Iran and its disruptions to energy markets has also damaged President Donald Trump’s approval ratings and imperiled the GOP’s control over Congress beyond the midterm elections.
In the month of August alone, consumer prices rose 0.4%.
Core inflation, which strips out the volatile categories of food and energy, fell a tenth of a percentage point to 2.4%.
Inflation has been high since 2021, when it took off as the economy reopened from the pandemic and the federal government spent trillions of dollars in stimulus under President Joe Biden. While the inflation rate has come down over time, it never fell to the Fed’s 2% target, and rose this year because of the war with Iran.
Fed Chairman Kevin Warsh, installed by Trump at the central bank this year, signaled last month that more must be done to bring inflation down to target. “We have work to do,” he said in a highly anticipated speech at a conference in Wyoming.
Investors expect that the Fed’s monetary policy committee will vote next week to raise short-term interest rates, a move that would be intended to limit borrowing and spending and thus put downward pressure on prices.
Such a move would bring Warsh into tension with Trump, who has repeatedly said that interest rates should be lower.
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Nevertheless, the public is clearly dissatisfied with high prices.
Persistent inflation has weighed down on consumer sentiment and Trump’s approval ratings, especially as gas prices have risen above $4 thanks to the disruptions to the global oil supply from the war.
