Consumer sentiment slipped in August as Americans primarily worried about one aspect of the economy: inflation.

The University of Michigan’s consumer sentiment survey released Friday showed year-ahead inflation expectations among Americans climbed to 4.8% in August, up from July’s reading of 4.5%. The headline consumer sentiment index came in at 58.2 for the month, down 5.7% from last month and 14.3% from a year ago.

“This month’s decrease was visible across groups by age, income, and stock wealth,” said Joanne Hsu, director of the survey of consumers.

“Moreover, perceptions of many aspects of the economy slipped. Buying conditions for durable goods subsided to their lowest reading in a year, and current personal finances declined 7%, both due to heightened concerns about high prices. Expectations for business conditions and labor markets contracted in August as well.”

Read more: What is consumer confidence, and why does it matter?

Against this deteriorating backdrop, only about a quarter of consumers expect to maintain their spending levels on items with large price increases, according to a report from UMich released Aug. 15.

Consumers will get a fuller read on the labor market situation next week when the Bureau of Labor Statistics releases its latest job openings numbers on Wednesday and its monthly payrolls report on Friday. Private payroll processor ADP will release its own monthly jobs numbers on Thursday.

Though the unemployment rate has been hovering between 4% and 4.2% since May 2024, job growth in the US economy appears to have slowed markedly, with 73,000 nonfarm payrolls added July while May and June’s jobs figures were revised sharply downward to a total gain of just 33,000 jobs.

Friday’s reading also came out shortly after the release of the Federal Reserve’s preferred inflation gauge, which showed price increases held mostly steady through last month, rising 2.6% over last year in July, matching annual increase seen in June.

Core prices, which exclude food and energy and are more closely watched by the Fed, rose by 2.9% year over year, the fastest rate since February.

The report also noted that despite a divergence in economic views among members of the two mainstream parties, a growing share of consumers across the political spectrum expect interest rate cuts to be coming down the pike.

Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.

A fresh reading on the Federal Reserve’s inflation gauge inched up again, but it isn’t likely to knock the central bank off course to cut rates in September.

“Today’s in-line PCE Price Index will keep the focus on the jobs market. For now, the odds still favor a September cut,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. “But the size of that opening is going to depend on whether labor-market weakness continues to look like a bigger risk than rising inflation.”

The Personal Consumption Expenditures index on a “core” basis, which excludes volatile food and energy prices, rose 2.9% from a year earlier, up from 2.8% in the previous month and the highest since February. On a monthly basis, core prices increased 0.3% for the second month in a row.

On a headline basis, prices rose 2.6% in July compared with a year ago, matching the increase in June. Month over month, prices rose 0.2% from June to July, down from 0.3% the previous month.

(The S&P 500 stock index has been trading down about 0.70% since the morning release of the inflation data.)

At the same time, the report showed that consumer spending picked up last month.

While Fed officials are keenly watching how much tariffs push up inflation, the rise in “core” prices in July was due to a rise in services prices. “That’s further evidence that tariffs are having minimal impact on goods prices,” said Harry Chambers, assistant economist for Capital Economics.

Read more: How jobs, inflation, and the Fed are all related

Chambers noted that the breakdown showed that core goods prices were unchanged on the month. Instead, the rise was driven solely by a 0.36% month-over-month rise in core services prices, which was expected given the strength of services CPI.

While inflation is not moving in the direction the Fed wants to see, Fed Chair Jerome Powell said in a speech in Jackson Hole, Wyo., last week that a reasonable base case is that inflation from tariffs will likely result in a one-time increase in prices — and that the balance of risks appears to be shifting.

Powell indicated there is concern about the direction of the strength of the job market given the lower payroll report for July and large downward revisions to job growth in previous months. He also noted that there’s been a marked slowing in both the supply of and demand for workers, suggesting that downside risks to employment are rising.

“If those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment,” said Powell.

It may very well be that the next jobs report, due out on Sept. 5, for the month of August could be the determining factor for lowering rates at the September policy meeting.

Is it too late to save Fed independence?

Last month, I surprised many by suggesting that Jerome Powell should resign as Chairman of the Federal Reserve to protect the policy independence of the world’s most influential central bank. He did not do so.

The attacks on the institution have since broadened and deepened, and now, worrisome cracks are beginning to appear in a long-standing principle that is crucial to the well-being of both the American and global economies.

In an alternative world, Chair Powell would serve out his term, which runs through May, while the independence of the Fed would remain unquestioned, and monetary policy would be appropriately set. But such a world is not possible, given the profound animosity between President Trump and Powell.

This animosity, born of years of disagreements since Powell’s appointment in Trump’s first term — and, some may even say, broken promises — has now metastasized. It has been spreading to many aspects of the Federal Reserve, drawing in more political actors and undermining the public’s already declining trust in the central bank and its chair, whose confidence rating has fallen to below 40% according to a Gallup poll released in April.

In recent months, the Trump administration appears to have sought “cause” to dismiss Powell. This campaign has included a made-for-TV exposition of the Fed’s building renovation project, which was over budget. It has been combined with constant attacks on Powell’s competency and politics, not just from the president but also from an expanding cast of characters that includes the Treasury Secretary, other senior administration officials, and the speaker of the House of Representatives.

Most recently, the administration has set its sights on one of Powell’s colleagues on the Board, Governor Lisa Cook, citing unproven allegations of mortgage fraud. The initial calls for Cook to resign and for Powell to dismiss her took a dramatic turn this week when President Trump “fired” her. Cook responded by stating that the president had no legal authority to do so, that she would sue, and that she would continue to serve in her role at the Fed. The legal battles have started.

This is not merely an administration-Cook issue. It is difficult to see how Powell can resist launching an internal Fed investigation. He may even have to decide whether to allow Cook back in the building during this period of legal battles and uncertainties.

Meanwhile, it is becoming increasingly evident to many that what is at stake now for the Fed goes well beyond the Board of Governors. If Governor Cook is eventually replaced with a close Trump loyalist, the board could secure enough votes to complicate the reappointment in February of every president of the 12 regional Federal Reserve banks, threatening to politicize the entire system in an unprecedented and unpredictable fashion.

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It’s a curious thing that the most aggressive move yet to influence the world’s most important central bank resulted not in a raucous reaction in the market but a whimper.

Stocks on Tuesday barely budged. The 10-year (^TNX) meandered down a hair. And longer-dated US bond prices rose only slightly, even as concerns mounted that Trump’s moves against the Federal Reserve’s independence could stoke inflation and instability.

The reaction was nothing like the post-“Liberation Day” sell-off. Back then, the bond market strong-armed the president into backing away from his most punishing tariff policies.

But this time, as the president attempts to fire a Federal Reserve governor, Wall Street appears largely unbothered. What changed?

Part of the answer has to do with timing. Right now, in the short term, the interests of the three main players — the Fed, the president, and the market — are all very much aligned.

While Trump appears to be wielding allegations of mortgage fraud as a pretext to oust Lisa Cook, he’s already publicly stated his policy aims for the Fed: He’s demanding lower interest rates. That’s what the bulk of investors want too. Fed Chair Powell signaled at Jackson Hole that he and his colleagues are ready to start cutting in as little as three weeks’ time, which makes the practical considerations for getting rid of Cook more abstract.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

As economists Stephen Brown and Thomas Ryan from Capital Economics put it in a note on Tuesday, “It remains unclear whether Trump’s letter firing Cook, posted on social media [Monday], will have any practical effect on policy setting in the near term.”

A fact that “perhaps explains the muted market reaction,” they added.

But even when markets tolerate a legally dubious but aligned maneuver, what happens in the longer run should the Fed see itself remade as a political entity?

“If the president were successful, the outcome would be momentous,” Michael Feroli of JPMorgan wrote in a note on Tuesday. Feroli added that if Cook is eventually removed, other officials not sufficiently in line with the president’s agenda could also face the ax.

“This would add to upside inflation risks,” Feroli said. And all else equal, higher inflation suggests higher interest rates, the opposite of what the White House is looking for.

Former Treasury Secretary Larry Summers said the political pressures and personal attacks targeting Federal Reserve Governor Lisa Cook are unprecedented — and it should alarm anyone concerned about the independence of US institutions.

“I have to say that the use of prosecution of one’s adversaries, whether it’s the FBI visit to John Bolton’s home or whether it is the kind of attack that has been launched on Lisa Cook, is, I think, something that should be chilling to many Americans,” Summers said on Yahoo Finance’s Opening Bid (video above).

Summers’s remarks come amid heightened tensions between the White House and the central bank. President Trump has repeatedly called for lower interest rates, adding to the strained relationship with Fed Chair Jerome Powell.

The criticism of Cook, however, represents a more personal escalation.

“If there’s a norm that all kinds of pressure tactics are legal, including bringing the power of law enforcement and investigation and demands for resignation to bear … if that becomes the new norm in American politics … [that] is a very profound threat,” he said.

Trump has escalated pressure on Cook recently, calling for her immediate resignation and warning, “I’ll fire her if she doesn’t resign,” following allegations from the Federal Housing Finance Agency that she committed mortgage fraud by misrepresenting her residences.

Cook — the first Black woman to serve on the Fed’s board — has firmly rejected the claims, stating she won’t be “bullied” by social media and is compiling accurate information to address legitimate questions about her financial history. Trump’s push could threaten the independence of the Fed, especially as his move could open the door for him to appoint a governor more allied with his views.

Read more: How much control does the president have over the Fed and interest rates?

The immediate economic impact of these disputes may be limited, but Summers warned of a more gradual, corrosive effect on the markets’ framework, even raising the specter of what he called the “Argentinization” of the US.

“I would hope that there’d be expressions of concern from the judiciary, from the business community, from people of goodwill everywhere,” he said.

Summers has been a vocal critic of the Trump administration’s policies.

He has blasted the recent passing of the One Big Beautiful Bill Act (OBBBA), calling out its potential to foster another financial crisis due to its creation of more debt obligations. Summers has also clapped back at current Treasury Secretary Scott Bessent for publicly meddling in interest rate policy but praised Powell’s handling of the situation.

US stocks ripped higher Friday after Federal Reserve Chair Jerome Powell opened the door to a September rate cut during his speech at Jackson Hole — a dovish turn that lit a fire under speculative trades from meme stocks to crypto.

“The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said.

“Powell clearly opens the door for a September cut,” Oxford Economics chief US economist Ryan Sweet wrote in a note. “When Fed chairs open the door for a rate cut, it’s quite difficult to close.”

That expectation helped ignite a broad risk-on rally, with some of the market’s most volatile corners leading the charge.

Opendoor (OPEN), a debated Wall Street meme stock, surged nearly 40% as investors piled into housing-related names on expectations that lower borrowing costs could revive demand.

Crypto and crypto-linked equities also roared back. Ethereum (ETH-USD) spiked 14% as of Friday afternoon, outpacing a 4% gain in bitcoin (BTC-USD). Solana (SOL-USD) and XRP (XRP-USD) each rose around 10% and 7%, respectively.

That enthusiasm spilled into crypto-adjacent names as well: Coinbase (COIN) climbed over 6%, Robinhood (HOOD) added about 3%, and Strategy (MSTR) gained 6%.

The moves marked a sharp rebound after a bruising stretch for speculative assets, particularly as doubts mounted over the sustainability of the AI-fueled tech rally.

“Equity markets reacted very positively,” Scott Chronert, managing director of US equity strategy at Citi, wrote in a Friday note, highlighting the Russell 2000 (^RUT), a benchmark for small-cap stocks, had the most “striking surge” as investors shifted money into more economically sensitive names.

That broadening story, which captured Wall Street’s attention this week, was also evident with the equal-weighted S&P 500, which gives smaller companies the same influence as megacap tech, slightly leading the headline index.

That signals the rally is beginning to expand beyond the largest technology stocks that have dominated gains over the past two years.

Still, Chronert noted Friday, “there is some ‘junkiness’ to this initial reaction. Speculative/non-earners in growth sectors outperformed.” Speculative growth names, particularly unprofitable tech companies, have surged since the April market bottom.

Goldman Sachs’ Non-Profitable Tech Index, which tracks US-listed tech firms that have yet to generate positive GAAP earnings, jumped about 4% on Friday, extending its recent rebound. The index has climbed more than 65% off its spring lows and now sits just shy of recent highs.

Federal Reserve Chair Jerome Powell signaled to investors on Friday that the central bank is likely to embark on a cycle of lowering interest rates as soon as September.

But Powell’s speech at the Jackson Hole Economic Symposium suggested that while tariffs have created significant uncertainty about the path for inflation, it’s now the US labor market that bears closer watching from the central bank.

“While the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers,” Powell said.

“This unusual situation suggests that downside risks to employment are rising,” he added. “And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.”

The July jobs report, it seems, continues to cause a rethink of the path forward for the US economy.

And how the labor market evolves makes the path ahead for interest rates this year and beyond a particularly rich conversation for Fed officials and investors alike.

The July jobs, published Aug. 1, showed the US economy added 73,000 jobs last month, while some 258,000 jobs were wiped away in revisions to May and June’s data. Following this release, President Trump fired the head of the BLS. Over the last three months, job gains have averaged just 35,000.

Read more: How jobs, inflation, and the Fed are all related

Still, Powell said, this data “does not appear [to show] that the slowdown in job growth has opened up a large margin of slack in the labor market — an outcome we want to avoid.” He also noted that the unemployment rate remains low and has been stable over the last year.

And it was the unemployment rate that a year ago gave Powell and the Fed particular cause for concern.

Powell said Friday that when he spoke at Jackson Hole in August 2024, the US economy was “at an inflection point.”

Inflation was falling, but unemployment was rising at a rate typically associated with recessions. Starting last September, the Fed cut rates by a total of 100 basis points.

This move, Powell said, “[set] the stage for the labor market to remain in balance near maximum employment over the past year.” As of July, the unemployment rate stood at 4.2%, the same as the year prior.

Powell also pointed to indicators like quits, layoffs, and the ratio of vacancies to unemployment as showing the labor market’s stability over the last year. A stability that, again, Powell finds “curious” given the maelstrom of other policy changes weighing on the economic outlook.