What To Expect From Friday’s Report On Inflation

• A key report on inflation on Friday is expected to show consumer prices rose 2.7% over the year in August, up from a 2.6% annual increase in July.
  

• Economists’ average expectation is that core inflation will be 2.9% over the year, the same as it was last month and above the Federal Reserve’s target of a 2% annual rate.

• Tariffs have pushed up consumer prices, raising inflation concerns.
  

A report on inflation this week could serve as a reminder that the Federal Reserve’s battle against inflation is far from won despite the central bank’s recent rate cut.

Economists expect Friday’s report on inflation as measured by Personal Consumption Expenditures to show prices rose 2.7% over the year in August, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. That would be up from a 2.6% annual increase in July, and the fourth month in a row the key inflation measure has accelerated.

The average forecast calls for “core” PCE inflation, which excludes volatile prices for food and energy, to stay at a 2.9% annual increase after rising the previous three months. Some forecasters are calling for it to tick up to 3%, which would be its highest point since early 2024. The Fed uses core inflation as its benchmark for judging whether inflation is running at its target of a 2% annual rate.

Fed officials have acknowledged that the pandemic-era burst of inflation has stayed stubborn this year. Several have noted President Donald Trump’s tariffs have pushed consumer prices for many imported goods.

Fed officials and other economists expect inflation to stay above target for years to come. For now, the Fed has prioritized saving the job market over fighting inflation. Every member of the Fed’s policy committee voted for a rate cut last week despite inflation concerns in an effort to lower borrowing costs and boost hiring.

The inflation uptick is likely to be a smaller one than forecasters had anticipated a few weeks ago, Jim Reid, head of macro and thematic research at Deutsche Bank, wrote in a commentary. Some measures of inflation that figure into the PCE calculations, such as wholesale prices, were smaller than expected for August, suggesting a tamer though still elevated PCE inflation rate.

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