Inflation Heated Up in August as Tariffs Hit Prices

Inflation rose again in August, moving further from the Federal Reserve's goal of 2% and providing evidence that tariffs are putting upward pressure on prices.

The consumer price index (CPI) for August increased 0.4% on a monthly basis and rose 2.9% for the 12 months ending in August, the U.S. Bureau of Labor Statistics (BLS) reported Sept. 11. That's up from the 0.2% monthly rise in July and from the month's annual inflation rate of 2.7%.

The index for shelter rose 0.4% in August and was the largest factor in the all items monthly increase, the BLS said. The food index increased 0.5% over the month as the food at home index rose 0.6% and the food away from home index increased 0.3%. The index for energy rose 0.7% in August as the index for gasoline jumped 1.9% over the month.

Core inflation, which excludes volatile food and energy prices, rose 0.3% in August and 3.1% annually, the same as in July.

The data reinforces that "tariff-related price increases have continued to put upward pressure on consumer and producer prices," said Sydney Ross, economic researcher at SHRM.

Given the current economic picture, employees and consumers will likely face higher prices in the near term, Ross said.

"These inflationary pressures would mean that households will probably hold off on big purchases, especially for products such as household appliances, electronics, and furnishings manufactured abroad," she said. "While several retailers frontloaded demand earlier in the year in anticipation of tariffs, those inventories are drying up and consumers largely expect to see inflation tick up in the near term."

Indeed, financial stress has been rising for employees. Recent data from Bank of America found that 47% of workers feel financially well off, down from 52% at the start of the year.

For employers, that means they would "be wise to increase efforts to understand what higher costs may look like to help inform any strategic planning in the future," Ross said. For example, with health care costs expected to rise in 2026 and amid a lack of clarity on tariff measures related to pharmaceutical products, evaluating benefits and health compensation packages is essential right now, she said.

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Real Earnings Decreased

Meanwhile, real earnings fell slightly in August, with real average hourly earnings for all employees decreasing 0.1% from July to August, seasonally adjusted, the BLS reported separately. That stems from an increase of 0.3% in average hourly earnings combined with an increase of 0.4% in the CPI.

Real average weekly earnings decreased 0.1% over the month due to the change in real average hourly earnings combined with no change in the average workweek, the BLS said.

From August 2024 to August 2025, real average hourly earnings increased 0.7%, seasonally adjusted. The change in real average hourly earnings combined with a 0.3% decrease in the average workweek resulted in a 0.4% increase in real average weekly earnings over this period, according to the BLS.

When it comes to adjusting to current economic conditions, Ross said employers should take an individual approach because "some employers are more likely to be more directly impacted by tariff-related or regulatory changes than others."

"When making hiring decisions, organizations need to consider not only their talent needs, but also the local labor market they operate in, the kinds of skills they are searching for, and whether there are alternative routes — such as remote work options — to expand the talent pool," she said.

Staying up-to-date on regulatory policy changes and tracking any potential impact on business operations is also key.