Inflation is creeping higher, putting pressure on American consumers

For Kasey McBlais, a 42-year-old single mom who lives in Maine with her two elementary school-aged children, the cost of running a household is only getting more expensive, from buying groceries to paying for her home's upkeep.

"It's really challenging," McBlais, who works at a nonprofit, says of managing her expenses. "It's paycheck to paycheck."

Cleaning her chimney cost $500 this year, up from about $200 when she bought her house in 2019. And grocery money isn't going as far either, prompting McBlais to stretch meals to make sure the family has leftovers. "I honestly don't expect anything to go back to the way they were — it's a matter of things leveling off where they are at," she said.

McBlais' concerns and struggles come as the pace of inflation continues to creep higher, remaining well above the Federal Reserve's goal of driving it down to an annual 2% rate. The situation is leaving some consumers feeling frustrated by stubbornly high prices on everything from groceries to housing, souring their views about the health of the U.S. economy.

In a recent CBS News poll, two-thirds of Americans said that prices in the past few weeks have continued to rise, with nearly all saying they expect the rise in costs to continue.

On Thursday, the Consumer Price Index is expected to show that prices rose at an annualized rate of 2.9% in August, up from 2.7% in July. Some economists point to the Trump administration's tariffs as a contributing factor.

"Tariffs will raise prices, and that does of course lead to inflation — there's no way around that," said Erasmus Kersting, an economics professor at the Villanova School of Business.

To be sure, inflation is well below its pandemic peak. But the Federal Reserve's progress has been slipping, with recent CPI data showing price growth picking up again after reaching a low point this spring.

At the same time, President Trump is pushing the Federal Reserve to cut its benchmark rate, posting on social media on Wednesday that there is "no inflation!!!" He also urged the Fed to "lower the RATE, BIG, right now."

In July 2024, when Mr. Trump pledged to end the "inflation nightmare," the CPI rate stood at 2.9%, or the same pace that economists forecast for tomorrow's report.

"The president would like people to stop paying attention to inflation now because it's not helping it," Kersting noted. "In the past he wanted people to pay attention to it, because back then it did help him win the election."

Asked for comment on forecasts the CPI will show an uptick in inflation, the White House said the president is delivering on his promises.

"Joe Biden unleashed the worst inflation crisis in nearly four years — President Trump ended it. Despite the media's false narrative, core inflation has run at a 2.4% average pace since President Trump took office which is the lowest 6-month pace since March 2021. The so-called 'experts' have been wrong month after month: tariffs have not hiked prices and President Trump is delivering on his promise to make America affordable again," White House spokeswoman Taylor Rogers told CBS MoneyWatch.

A hotter CPI report would complicate the Federal Reserve's task of deciding its next interest rate move on Sept. 17, given that the labor market has stalled out this summer. The Fed's so-called "dual mandate" requires it to promote full employment while keeping inflation in check.

So far in 2025, the Fed has held its benchmark rate steady, with Chair Jerome Powell saying he wanted to keep the central bank's powder dry in case tariffs caused inflation to reignite. Because rate reductions make it cheaper to borrow, they can spur businesses and consumers to open their wallets, adding to inflationary pressures.

But two consecutive disappointing jobs reports signal that the labor market is stalling out, putting pressure on the Fed to cut rates, which can help bolster hiring by making it cheaper for businesses to borrow and add more workers. Powell last month signaled the Fed may be open to a cut, pointing to the labor market's risks.

The probability of a 0.25 percentage point rate cut is pegged at 90% by CME FedWatch, which bases its forecast on 30-day Fed Funds futures prices. There's a slimmer 10% likelihood that the Fed could usher in a jumbo cut of 0.5 percentage points, its data shows.

A rate cut could help some consumers by lowering their borrowing costs, with interest fees on credit cards, home equity lines of credit and other loans likely to drop after a reduction. But households are still continuing to face higher prices at the grocery store and for household bills, experts note.

"Budget pressure has never fully let up for many households, even as inflation subsided during 2024 and early 2025," Stephen Kates, a certified financial planner and Bankrate financial analyst, said in an email. "Current and future inflation expectations feel like a slow, painful walk down memory lane."