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“In aggregate, it’s still hotter than the Fed would like to see,” said James Knightley, chief international economist at ING. “They’ll be looking at the broader picture. The U.S. is predominately a service sector economy.”<\/p>\n
Beef is prepared for a customer in a grocery store in Miami, Florida, on July 22, 2025.<\/p>\n
Joe Raedle | Getty Images<\/p>\n
Key inflation reports this week are expected to show that prices accelerated again in August, though not in a way that would keep the Federal Reserve from reducing its benchmark interest rate at a meeting next week.<\/p>\n
The Bureau of Labor Statistics is scheduled to release the producer price index for August on Wednesday, followed by the more closely watched consumer price index the next day.<\/p>\n
Economists expect the reports to show monthly increases of 0.3% across the board, including the headline all-items indexes as well as the critical core readings that exclude volatile food and energy prices, according to Dow Jones.<\/p>\n
If that is the case, it would push the annual headline CPI rate to 2.9%, the highest level since January, and further from the Fed’s 2% target and up 0.2 percentage points from July. On its face, that would seem to be a deterrent for the Fed to ease monetary policy when it meets next week.<\/p>\n
However, two factors will come into play. First, the core reading is predicted to be unchanged at 3.1%. Second, the increase in inflation is largely expected to come from tariff-sensitive goods rather than services prices that affect a much larger part of the $30 trillion U.S. economy.<\/p>\n
If those trends are apparent in the report, central bank policymakers are expected to look through the increase and turn their attention more to the increasingly weak jobs market<\/a> that could use a boost from lower rates. Fed officials for now are mostly viewing tariffs as one-off price increases not likely to cause longer-lasting inflation.<\/p>\n “In aggregate, it’s still hotter than the Fed would like to see,” said James Knightley, chief international economist at ING. “They’ll be looking at the broader picture. The U.S. is predominately a service sector economy.”<\/p>\n<\/p>\n