Inflation revs up ahead of Fed rate-cut decision

Prices rose last month for a variety of items, while a measure of layoffs also increased.

- By CHRISTOPHER RUGABER

TOM WILLIAMS Associated Press THE LABOR data add to the pressure on the Federal Reserve. Above, a grocery shopper in Washington, D.C.

Inflation rose last month as the price of gas, groceries, and airfares jumped, while a measure of layoffs also increased, putting the Federal Reserve in a tough spot as it prepares to cut rates at its meeting next week despite persistent price pressures.

Consumer prices increased 2.9% in August from a year earlier, the Labor Department said Tuesday, up from 2.7% the previous month and the biggest increase since January. Excluding the volatile food and energy categories, core prices rose 3.1%, the same as in July. Both figures are above the Fed’s 2% target.

The reading is the last the Fed will receive before its two-day meeting that begins Tuesday, when policymakers are widely expected to cut their short-term rate to about 4.1% from 4.3%. Still, the new inflation data underscore the challenges the Fed is facing as it experiences relentless pressure from President Trump to cut rates. Inflation remains stubborn while the job market is weakening, diverging trends that require polar reactions from Fed policymakers to address.

Hiring has slowed sharply in recent months and was lower than previously estimated last year. The unemployment rate ticked up in August to a still-low 4.3%. And weekly unemployment claims rose sharply last week, the government also reported Thursday, a sign that layoffs may be picking up.