Closing post
A quick recap
More clouds are gathering over the US economy, as new data shows a rise in joblessness as inflation picks up.
Applications for US unemployment benefits jumped last week to the highest level in almost four years; Initial claims rose by 27,000 to 263,000 in the week to 6 September, the highest since October 2021.
This latest sign of a weakening jobs market has pushed shares higher on Wall Street, as investors anticipate cuts to US interest rates.
That’s despite US inflation rising in August, with the consumer prices up by 2.9% over the last year, up from 2.7% in July.
Rising food and housing costs were a factor, while economists warned that companies were passing on the cost of tariffs to consumers.
In the eurozone, the European Central Bank has left interest rates on hold today, while nudging some of its growth and inflation forecasts a litte higher.
In the UK, the owner of John Lewis and Waitrose has said its losses nearly tripled to £88m in the first half of this year, as it took a hit from restructuring costs as well as new tax and regulatory charges.
John Lewis Partnership, which operates 36 department stores and more than 300 Waitrose supermarkets, said new packaging regulations and increased national insurance contributions had cost it £29m, while it spent £54m on restructuring its business, mainly on replacing outdated technology.
As a result, the employee-owned group’s half year pre-tax losses widened from £30m over the same period a year before, despite a 4% rise in sales to £6.2bn in the six months to 26 July.
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Wall Street opens higher on rate cut hopes
Wall Street’s main indexes have opened higher, despite today’s data showing a jump in unemployment claims and consumer prices.
Rather than worrying about the state of the labor market, traders seem to be betting that the US Federal Reserve is on track to cut interest rates next week.
The Dow Jones industrial average has risen by 218 points, or 0.5%, in early trading to 45,708 points.
The broader S&P 500 index is 0.25% higher.
Analysts at ING agree that the Fed’s focus is now the jobs market.
James Knightley, ING’s chief international economist, explains:
Inflation was a touch higher than expected and tariffs are likely to keep it elevated over coming months, but the the weakening of the jobs market is now the Fed’s priority, with rising jobless claims hinting at a pick-up in lay-offs at a time when hiring is subdued
Curiously, much of the increase in US jobless claims last week was recorded in Texas.
The number of initial claims (a proxy for layoffs) in Texas almost doubled in the week to 6 September, to 31,908 from 16,604 in the previous seven days.
There was also an increase of 2,980 in Michigan, but many other states recorded a drop in claims (before seasonal adjustments).
Bloomberg economist Eliza Winger says:
The surge in initial jobless claims in the first week of September came primarily from Texas, while claims declined in most states. While any deterioration in the labor market bears watching given growing labor-market weakness, a broader increase in claims would have been much more concerning.”
ShareExperts: Fed likely to cut rates to help weak jobs market
The jump in US jobless claims last week, and the pick-up in inflation in August, are a worrying sign for America’s economy.
Together, they paint a picture of an economy losing jobs, as consumers are hit by rising prices in the shops, as tariffs are passed onto consumers.
Atakan Bakiskan, US economist at Berenberg bank, explains:
“The August CPI inflation report was a hot one, no matter how you slice or dice it. President Donald Trump’s inflationary policies – tariffs and restrictive immigration measures – are gradually showing up in the hard data and continue to erode consumers’ purchasing power. Although inflation came in hotter than expected, the Fed is likely to prioritise signs of labour market weakness for now.
“Supporting this view, initial jobless claims data – released at the same time as the CPI report – showed first-time applications for unemployment benefits jumping to 263k in the week of 6th September, up from 237,000 the week prior, which is the fastest pace of increase since October 2024 and the highest level since October 2021.
This reinforces the Fed’s view of an increasingly fragile labour market. Markets placed more weight on the weak jobless claims data than on the hot August inflation print – a leading to a drop in 2-year and 10-year yields, and traders fully pricing in three rate cuts this year.”
Kathleen Brooks, research director at XTB, agrees that the Fed should prioritise the ‘weak’ jobs market, saying:
While a 2.9% CPI rate is not exactly dovish, the lack of feed through from tariffs into the CPI report could ease Fed concerns about the future path of inflation. Added to this, there was more weakness in the US labour market. Initial jobless claims jumped from 236k to 265k last week, which is one of the highest levels over the last 4 years.
This supports the view that the Fed should be focused on the deterioration in the labour market rather than inflation risks, and it supports a 50bp rate cut, in our view.
ShareNew US unemployment claims hit near four-year high
Ouch! The number of Americans filing new claims for jobless support has hit its highest level in almost four years.
The number of ‘initial claims’ for unemployment benefits jumped by 27,000 last week to 263,000, the highest level for initial claims since October 23, 2021.
That will reinforce concerns that the US labor market has weakened, following recent weak non-farm payroll reports, and Tuesday’s news that the US added 911,000 fewer jobs than first estimated for the year to March.
Aaron Hill, chief market analyst at FP Markets, says the jobs slowdown will fan speculation that the US Federal Reserve will cut interest rates, adding:
The central bank faces mounting pressure, but its room to manoeuvre is razor-thin.
ShareCompanies ‘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%.
ShareTariffs ‘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, 2025Share
Updated at 08.45 EDT
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
ShareECB 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.
ShareNew 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%.
ShareECB 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:
The ECB’s deposit facility, used by banks to make overnight deposits with the Eurosystem, remains at 2%.
The main refinancing operations rate, paid when banks can borrow funds from the ECB on a weekly basis, remains at 2.15%.
The marginal lending facility rate, paid when banks borrow overnight from the ECB, remains at 2.4%
ShareTube 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:
District Line: Service is operating with minor delays between Upminster and Whitechapel only
Metropolitan Line: Service is operating with minor delays between Baker Street and Watford only.
Piccadilly Line: Service is operating with minor delays between Acton Town and South Harrow and Arnos grove to Cockfosters only.
Updated at 08.03 EDT
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.
Updated at 07.53 EDT