US inflation accelerates to 2.9% in August ahead of key Fed decision

US consumer prices rose 2.9% in the year to August, the fastest annual pace since the start of the year and up from 2.7% in July, the latest Labour Department figures showed, raising fresh questions as the Federal Reserve prepares for a key policy meeting.

The increase in the Consumer Price Index (CPI) comes ahead of a Fed decision in which officials will weigh whether to cut interest rates or keep them on hold. The central bank has held its policy rate steady since last year while monitoring inflation developments and other risks to the outlook.

Policymakers have cited uncertainty around the impact of import tariffs on consumer prices as a factor in their deliberations. Tariffs implemented by the administration have been singled out by Fed officials as a potential upward force on prices, and the latest CPI print will be examined for signs that trade measures are feeding through to consumer costs.

The August rise follows a period of easing inflation earlier this year; the uptick to 2.9% marks a reversal from lower readings in recent months. Economists and markets will scrutinise the broader CPI report to see whether the increase was broad-based or concentrated in a few categories.

Political pressure on monetary policy has intensified. President Donald Trump and some of his allies have publicly criticised the Fed for not cutting rates at the same pace as central banks in other advanced economies, including the UK and those in the euro area. Fed officials typically stress their independence and have pointed to data-driven criteria for any policy moves.

Financial market participants have been parsing recent economic data for clues to the Fed's path. A higher-than-expected inflation print could strengthen arguments among officials for maintaining the current stance until clearer evidence of sustained disinflation appears. Conversely, signs that underlying inflation remains subdued could keep the door open to eventual easing.

The Labour Department's CPI figures are a central input to Fed deliberations but are not the only factor. Officials also consider measures of labour market strength, wage growth, and global economic developments in setting policy. With the latest CPI now public, attention will turn to the Fed meeting and statements from policymakers for guidance on how monetary policy may evolve in coming months.