What the New Inflation Report Means for Your Wallet
Written by
T. Woods
Edited by
Rebekah Evans
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The Consumer Price Index (CPI), which measures the amount paid for consumer goods and services (and tracks the changes in what is paid), is an extraordinarily useful barometer for measuring the inflation levels in America, as well as potentially predicting where those inflation rates may go if left unchecked.
Recently, analysts were surprised to learn via the CPI that inflation increased at a higher than expected level in August. Find out below what this means for your finances.
What Is the Current Inflation Rate?
Per Forbes, the Labor Department’s CPI report for August indicated that inflation increased 0.4% from the July numbers and was 2.9% higher than August of 2024. For reference, the Federal Reserve Open Market Committee (which develops financial policy for the Federal Reserve), often works to keep inflation rates to 2%; August’s inflation gains since January of this year.
What Happened — Why Are Rates Increasing?
Interest rates can be driven by a complex knotting of economic factors; however, the reason behind this slightly higher-than-expected bump is likely due to a recent Labor Department report indicating 263,000 in unemployment compensation filings — which was higher than the expected unemployment number of 235,000. For context, 263,000 is the highest claims level in the last four years, per CNBC.
What Does This New Inflation Report Mean for You?
The first and most short-term impact of such high numbers? You’re going to feel them in the checkout lanes and checkout pages. As Forbes noted, food prices are up by 0.5% from July and 3.2% from this time last year, energy costs have increased by 0.7% since July and 0.2% since August of 2024 and housing costs have gone up by 0.4% since July and 3.6% since August of last year.
Long-term, higher-than-expected interest rates tend to lead to interest rate cuts by the Federal Reserve. Cutting interest rates (gradually, so as not to create recession risks) will help generate economic activity as consumer goods and services will decrease in price and if and when the economy improves, so too do unemployment numbers. While the Fed has yet to announce such cuts, the weak jobs report followed by the high CPI numbers make such cuts likely. Interest rate relief is almost surely on the way, but you’ll have to muddle through at checkout a little while longer.
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