Fed Hike Decision Hangs in Balance as Inflation Report Looms

Friday's inflation report is set to be one of the most consequential in years, amidst spiking oil prices and rising interest rates. The Federal Reserve is considering whether to lift its short-term interest rate next week, with some officials saying Friday's report could swing them either way.

The Trump administration is seeking to counter voter concerns about high prices and rising interest rates as the midterm elections approach. President Donald Trump has promised $5,000 payments to every American adult if the GOP keeps a majority in Congress, a move that would require congressional approval and could stoke inflation.

The government is expected to report that headline inflation ticked down last month to 3.3% from 3.4%, according to data provider FactSet. However, this is still above the Fed's 2% target. Core prices are projected to have risen by just 0.2% from July to August and 2.4% last month from a year earlier.

The cooling in core prices may not sway the Fed or console many consumers. Renewed fighting in the Middle East has pushed up energy costs, with the nationwide average cost of a gallon of gas on Thursday jumping 7% from a month ago to $4.28. Gas prices on Labor Day were at a record high for that date.