NEWS AND INSIGHTS | INSIGHTS

CIO Notebook: August Core CPI As Expected but Claims Steal the Spotlight

September 11, 2025
Shannon Saccocia, CFA, Chief Investment Officer - Wealth

We continue to believe that volatility creates opportunities to align portfolios with long-term strategic asset allocations and emphasize putting cash to work as yields move lower.

U.S. core CPI was reported in line with expectations for the month of August, despite fears of a more meaningful acceleration on the back of higher tariff costs. The measure was up +0.3% month-over-month (MoM) and up +3.1% year-over-year (YoY) versus consensus expectations for +0.3% and +2.9%, respectively. Headline CPI came in a bit hotter on a MoM basis at +0.4% versus +0.3% estimated and was up +2.9% YoY.

Shelter prices continue to drive the monthly and annual gains; overall it was up +0.4% MoM and +3.6% YoY. Breaking the shelter measure down further, owners’ equivalent rent was up +0.4%, with rents up +0.3%, and lodging away from home up +2.3% on a MoM basis. Other noteworthy increases were evident in airfares (+5.9%) which continue to rise following an earlier summer slump; medical care, which cooled to +0.2% MoM but remains up +3.4% YoY; food, which was up +0.5% MoM on sharply higher prices in certain food at home categories; and motor vehicle maintenance, up +2.4% MoM.

In terms of monitoring tariff impacts, it was once again a mixed bag. Month-over-month gains in apparel, appliances, and video & audio seem to reflect a pass through of costs to consumers, but household furnishings were up only +0.1%. New vehicle prices are expected to rise over the next several months as new 2026 models reflect higher average selling prices, but for now, used cars are exhibiting more meaningful inflation, up +1.0% in August. When considering the last several months in aggregate, there has been some upward pressure on goods prices, but it has been inconsistent and likely impacted by a combination of seasonality and the start-stop nature of tariff policy making.

The impact of the much anticipated CPI release was overshadowed by a sharp increase in U.S. jobless claims of +27k. Expected at +235k, claims were reported at +263k, adding tinder to the rate cut fire that is already burning ahead of the Federal Reserve’s meeting next week. Admittedly, there is likely some noise in this particular print, with the Labor Day holiday and a sharp, likely weather induced spike in Texas pointing to the potential for yet another revision. However, combining this data with a lighter-than-expected U.S. core PPI print of -0.1%, the most recent non-farm payrolls report, and the downward revision of -911k jobs over a prior year period ending in March, has resulted in an increase in our rate cut expectations for this year to three cuts of 25 basis points at each of the Fed’s remaining 2025 meetings.

Equity investors will be forced to balance the tailwind represented by lower interest rates with the potential for more meaningful economic deterioration, and this push-pull dynamic is likely to continue as data releases roll in over the coming months. Bond investors will be navigating the tension that exists between the push lower in yields because of the Fed’s actions with longer-term challenges around budget deficits and fiscal sustainability. We reiterate our view that volatility creates opportunities to align portfolios with long-term strategic asset allocations and emphasize putting cash to work as yields move lower.

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