Rising Inflation, Cooling Jobs Market Suggest Impending Fed Rate Cut
Originally Published by: Builder Online — September 12, 2025
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Inflation accelerated by the highest rate in seven months in August, driving by higher costs for housing and food.
The Consumer Price Index (CPI) increased 0.4% on a seasonally adjusted basis compared to the previous month, according to the U.S. Bureau of Labor Statistics (BLS). Over the last 12 months, the index is 2.9% higher.
The increase in inflation comes less a week after a weak jobs report, in which just 22,000 jobs were added in August and the unemployment rate ticked up to 4.3%. The combination of a slowing job market and rising inflation increases the likelihood that the Federal Reserve will begin cutting rates, starting with a cut during its September meeting next week.
Amid rising costs and a slow job market, consumer sentiment ticked down in September, according to preliminary data from the University of Michigan. Consumers continue to view the economy with uncertainty, citing rising risks to business conditions, labor markets, and inflation. Additionally, tariffs are dampening consumer confidence, with approximately 60% of respondents providing comments about the topic, according to the University of Michigan.
The August inflation data suggests the impact of tariffs are beginning to impact costs, particularly for items such as groceries. The price index for food rose 0.6% in August, the highest monthly jump for that index in nearly three years.
The index for shelter rose 0.4% in August and was again the largest factor in the monthly increase in inflation, according to the BLS. The index for owners’ equivalent rent rose 0.4% in August and the index for rent increased 0.3%.
For the construction sector, prices for residential building materials rose for the fourth straight month in August, reaching its highest level since January 2023. While prices for inputs to new residential construction fell 0.1% in August, the inputs to the new residential construction price index grew 2.3% in August.
Building material prices increased 0.3% on a monthly basis in August and 3.4% on a year-over-year basis. August was the second consecutive month of above three percent price growth. According to an analysis by the NAHB, the August yearly increase in building material prices was the largest since a 4.9% increase in January 2023.