US inflation rises to 2.9%
Newsflash: US inflation jumped last month, which could harden fears that Donald Trump’s trade war is driving up the cost of living for Americans.
The US consumer prices index rose by 2.9% in the year to August, up from 2.7% in July, in line with forecasts.
Food prices rose by 3.2% over the year, the Bureau of Labor Statistics reports, while energy prices were only up by 0.2% over the last year.
Core inflation, which strips out food and energy costs, rose by 3.1% in the 12 months to August.
Key events
Companies ‘passing rising costs from tariffs onto consumers’
US inflation “continued its march higher” in August, reports Katy Stoves, investment manager at Mattioli Woods.
Stoves says US companies are now passing the cost of tariffs onto customers:
With buffer inventories that had been built ahead of tariffs being depleted, businesses are now forced to replenish stock at elevated prices. With the tariffs looking to be more permanent, companies now have cover to pass these rising costs onto consumers, rather than compressing margins.
Whilst some had anticipated tariffs would create a one-off price adjustment, the data increasingly suggests this may be a more prolonged process with peak effects still to come.
The prices of all six major American grocery store food groups rose in August, today’s US inflation report shows.
The index for fruits and vegetables rose 1.6% over the month, as tomato prices jumped by 4.5% and apple prices increased by 3.5%.
The meats, poultry, fish and eggs index increased by 1.0% in August with the beef index up by 2.7%. On an annual basis, meats, poultry, fish, and eggs were 5.6% more expensive than a year ago.
The index for nonalcoholic beverages increased by 0.6% during August and the index for other food at home increased 0.1%.
Dairy and related products index and cereals and bakery products both rose by 0.1%.
Tariffs ‘clearly hitting’ as US inflation rises
On a monthly basis, the US inflation report shows prices rose by 0.4% in August alone.
That’s twice as fast as the 0.2% rise in prices recorded in July.
The BLS reports that housing (shelter) and food were key drivers:
The index for shelter rose 0.4 percent in August and was the largest factor in the all items monthly increase. The food index increased 0.5 percent over the month as the food at home index rose 0.6 percent and the food away from home index increased 0.3 percent.
Heather Long, chief economist at credit union Navy Federal, says “Tariffs are clearly hitting now”
JUST IN: Tariffs are clearly hitting now. U.S. Inflation rises to 2.9% (y/y) in August–>up from 2.3% in April.
Higher food, gas and shelter costs drove inflation up in August. Cars, apparel and airfares also saw costs surge. ***Inflation jumped 0.4% during the month, the… pic.twitter.com/ap0q4r4OxW
— Heather Long (@byHeatherLong) September 11, 2025
US inflation rises to 2.9%
Newsflash: US inflation jumped last month, which could harden fears that Donald Trump’s trade war is driving up the cost of living for Americans.
The US consumer prices index rose by 2.9% in the year to August, up from 2.7% in July, in line with forecasts.
Food prices rose by 3.2% over the year, the Bureau of Labor Statistics reports, while energy prices were only up by 0.2% over the last year.
Core inflation, which strips out food and energy costs, rose by 3.1% in the 12 months to August.
Today’s statement from the European Central Bank doesn’t include any assessment of the eurozone economy, or cite any particular risk worrying policymakers.
It does, though, repeat the ECB’s pledge that it is “not pre-committing” to a particular path for interest rates, and will set policy based on data and infation dynamics.
It says:
The Governing Council is determined to ensure that inflation stabilises at its 2% target in the medium term. It will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.
In particular, the Governing Council’s interest rate decisions will be based on its assessment of the inflation outlook and the risks surrounding it, in light of the incoming economic and financial data, as well as the dynamics of underlying inflation and the strength of monetary policy transmission. The Governing Council is not pre-committing to a particular rate path.
Reuters’ correspondent Francesco Canepa says this takes being “deliberately” uninformative to new levels…
we knew the #ecb wanted to “deliberately” uninformative but the latest policy statement takes the cake. No analysis of current economic conditions, no reference to any particular risk. That increases the weight on Lagarde in a few minutes and on the projections’ report later
— francesco canepa (@FranCanJourno) September 11, 2025
ECB lifts inflation forecast for 2025 and 2026
We also have new inflation forecasts from the European Central Bank.
They now predict the cost of living will rise a little faster than it had expected this year and next.
ECB forecasts now estimate headline inflation will average 2.1% in 2025, up from 2% forecast in June.
Inflation is then expected to slip to 1.7% in 2016, up from the 1.6% forecast three months ago, For 2027, it’s seen at 1.9%, below the 2.0% forecast in June.
The ECB’s goal is to keep inflation at 2% over the medium term.
New ECB growth forecasts
The ECB has also raised its forecast for eurozone growth this year (hurrah!), but tempered this by slightly cutting its 2026 forecast.
It says:
The economy is projected to grow by 1.2% in 2025, revised up from the 0.9% expected in June. The growth projection for 2026 is now slightly lower, at 1.0%, while the projection for 2027 is unchanged at 1.3%.
ECB leaves eurozone interest rates on hold
Newsflash: The European Central Bank has left interest rates across the eurozone unchanged, at its latest policy meeting.
Announcing the decision, the ECB says:
Inflation is currently at around the 2% medium-term target and the Governing Council’s assessment of the inflation outlook is broadly unchanged.
The decision means:
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The ECB’s deposit facility, used by banks to make overnight deposits with the Eurosystem, remains at 2%.
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The main refinancing operations rate, paid when banks can borrow funds from the ECB on a weekly basis, remains at 2.15%.
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The marginal lending facility rate, paid when banks borrow overnight from the ECB, remains at 2.4%
Tube strike latest
Meanwhile in London, the underground system remains seriously disrupted by today’s strike action.
Most tube lines are still suspended, with three exceptions:
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District Line: Service is operating with minor delays between Upminster and Whitechapel only
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Metropolitan Line: Service is operating with minor delays between Baker Street and Watford only.
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Piccadilly Line: Service is operating with minor delays between Acton Town and South Harrow and Arnos grove to Cockfosters only.
Turkey cuts interest rates by more than expected
Over in Istanbul, Turkey’s central bank has announced a large cut to interest rates, but borrowing costs still remain high.
Turkey’s central bank has lowered its policy interest rate by 250 basis points to 40.5%, a slightly bigger cut than expected.
It eased policy after inflation slowed to 32.95% in August 2025 from 33.52% in July.
The Central Bank of the Republic of Türkiye explained:
The underlying trend of inflation slowed down in August. While GDP growth was above projections in the second quarter, final domestic demand remained weak. Recent data indicate that demand conditions are at disinflationary levels. Food prices and service items with high inertia are exerting upward pressure on inflation. Inflation expectations, pricing behavior, and global developments continue to pose risks to the disinflation process.
The tight monetary policy stance, which will be maintained until price stability is achieved, will strengthen the disinflation process through demand, exchange rate, and expectation channels.
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