Persistent Inflation Concerns: Wage Effects Continue to Drive Prices Up

The ongoing increase in inflation is leading economists to assess that a further acceleration in consumer price rises will follow in the fourth quarter. The tariffs introduced by President Donald Trump have led to noticeable price increases in everyday goods as companies attempt to pass on the new import costs to their customers. Forecasts such as those from the Federal Reserve Bank of Philadelphia expect the consumer price index to rise by 3% in the fourth quarter. This would be a slight increase from the 2.9% rise in August and the highest inflation rate since May 2024. Similarly, consumer prices, as measured by personal consumption expenditures, which is considered a more precise indicator of inflation trends, rose by 2.9% in August, unchanged from July. Households particularly feel the impact of inflation on essential goods such as gasoline and food. Although average wages have increased in line with inflation since the pandemic, the income distribution remains very unequal, burdening many households. While some companies have so far refrained from raising consumer costs in order not to lose customers, a growing number plan to pass on the tariff costs in the future. According to an analysis by the Yale Budget Lab in June, 70% of tariff costs have already been passed on to consumers. However, further tariff-driven inflation seems inevitable in the coming months. Some economists view the tariff effects as significant but temporary. Experts from Goldman Sachs anticipate a rise in core PCE inflation to 3.2% by December, but expect a decline from 2026. A notable comparison to the high inflation period after the pandemic, when the price increase in June 2022 was an impressive 9.1%. The Federal Reserve had to cut its benchmark interest rate last week for the first time since 2025, indicating weaker labor market conditions. Although further interest rate cuts seem possible, rising inflation could force the Central Bank to proceed cautiously. The Federal Reserve faces the challenge of promoting both labor market well-being and stable prices simultaneously.