Viewpoint: US inflation data — upside surprise in CPI won’t really matter for next week’s FOMC meeting

Ordinarily, indications of firm, underlying inflationary pressures would argue against rate cuts, but the assumption that tariff-driven price increases will prove temporary, and the notable shift in focus at the U.S. Federal Reserve (Fed), means that today’s U.S. Consumer Price Index report¹ will likely carry less than normal sway in next week’s policy discussions. Instead, the rising concerns about the job market mean that the September 11 data on initial claims filings for state unemployment insurance programs² may well garner more of the attention from the dataflow and support policymakers’ decision to cut the Fed funds rate target by 25 basis points next week (with potential for a discussion and possible dissent in favour of more), with more to come later this year (Fed funds futures now pricing 73bps worth of cuts by year-end). As a result, U.S. Treasury security yields are lower and the curve is bull-steepening, while the U.S. dollar is broadly weaker.

Turning to the data, the U.S. Consumer Price Index (CPI) rose by a greater than anticipated 0.4% on a month-over-month (MoM) basis in August (consensus was +0.3%; unrounded change was +0.372% which is a seven month high) while the CPI index excluding food and energy (core CPI) matched the expected 0.3% increase (narrowly as the unrounded rise was +0.346%, also a seven month high).

The increase was largely driven by a bounce in shelter costs (+0.44% MoM is the largest rise in a year). Still, in a sign that tariff pressures are becoming increasingly evident, the grouping for consumer goods outside of food & energy (“core” goods) rose 0.28%, which matched a 27-month high — that said, the “core” services excluding shelter costs (a previously closely watched indicator of broader price pressures) registered a fairly modest +0.22% MoM rise.

US Consumer Price Index by component

(contribution to month-over-month percent change)

Source: Guardian Capital, based on data from the Bureau of Economic Analysis to August 2025

With a firm monthly increase, the 12-month CPI inflation rate perked up to 2.9% (unrounded +2.94% year-over-year (YoY), consensus was +2.9%), which represents the fourth straight acceleration and a seven-month high. The core inflation rate accelerated for the third straight month (3.11% YoY in August, from 3.05% in July, is technically steady on a rounded basis and consistent with consensus forecasts), with the steady reading for core services, excluding shelter (a firm +3.6% YoY), compounded by core goods seeing their biggest year-over-year increase in more than two years (though a modest +1.5% YoY); shelter cost pressures did come down a tick, though (+3.64% YoY versus +3.69% in July). Overall, not the most cooperative set of data for those on the dovish side of the spectrum.

US Consumer Price Index by component

(contribution to year-over-year percent change)

Source: Guardian Capital, based on data from the Bureau of Economic Analysis to August 2025

Turning to the employment side of the dual mandate, initial claims filings rose to 263,000 in the week of September 6, 2025, from 236,000 in the prior week (consensus was 235,000), which marked the highest reading since October 2021. While this may represent an indication of an increase in job loss in the U.S., there are some caveats that are worth pointing out.

For starters, last week included the Labour Day holiday, and these weekly data are notoriously difficult to seasonally adjust around holiday-shortened weeks — and note that Labour Day fell on September 1 this year, which is the earliest it can be (it will fall on September 7 next year, the latest it can be).

Second, and supporting this last point, the “unadjusted” level of claims filings came in at 204,600, which compared to readings of 196,700 in the previous week, a much smaller increase, that suggests we could see some seasonal-factor-induced reversal in next week’s seasonally-adjusted data — and note that the state-level data show that the increase here was almost entirely due to one state, Texas, rather than any sort of broad-based upward pressure.

Third, it is worth noting that 263,000 filings may be elevated relative to recent weeks, but it is still within the ranges of recent years (excluding the pandemic) — and it remains historically low, suggesting that we are still in a “low firing” environment, while the undershoot on the number of people receiving unemployment insurance (1.939 million compared to expectations of 1.95 million and the high of 1.968 million five weeks ago; which is also low from a historical standpoint) is not yet pointing to the ranks of the unemployed swelling.

Initial claims for state unemployment insurance programs, US

(thousands)

Source: Guardian Capital, based on data from the U.S. Bureau of Labor Statistics to September 6, 2025

Initial claims for state unemployment insurance programs, US

(thousands)

Shaded regions represent periods of US recession; source: Guardian Capital based on data from the U.S. Bureau of Labor Statistics to September 6, 2025

Continuing claims for state unemployment insurance programs, US

(thousands)

Shaded regions represent periods of US recession; source: Guardian Capital based on data from the U.S. Bureau of Labor Statistics to August 30, 2025

David Onyett-Jeffries
David Onyett-Jeffries is Vice President, Economics & Multi Asset Solutions, at Guardian Capital LP (GCLP). He provides macroeconomic guidance to GCLP and its affiliates. Additionally, he is a portfolio manager of GCLP’s multi-asset portfolios and funds and works closely with GCLP’s Directed Outcomes team.

¹ U.S. Bureau of Labor Statistics, Economic News Release, Consumer Price Index – August 2025, September 11, 2025, https://www.bls.gov/news.release/cpi.nr0.htm
² Department of Labor, News Release, Unemployment Insurance Weekly Claims, Seasonally Adjusted Data, September 11, 2025, https://www.dol.gov/ui/data.pdf

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Published: September 11, 2025