Producer price inflation unexpectedly rose to 5.4% in August, adding to pressure on Fed

Inflation, as measured by the producer price index, ticked up six-tenths of a percentage point to 5.4% for the year ending in August, the Bureau of Labor Statistics reported Thursday.Economists have been closely examining inflation reports because of the higher energy prices stemming from the war with Iran and fears that they will translate to higher overall inflation. The Federal Reserve has also been forced to recalibrate its monetary policy because of high inflation, and many expect the Fed to raise its interest rate target at its meeting next week in an effort to put downward pressure on prices.The increase in inflation could lead Fed officials to favor tighter monetary policy. Inflation is still far higher than the central bank considers to be healthy and has hurt President Donald Trump’s approval rating with voters heading into the midterm elections.On a month-to-month basis, the price index rose three-tenths of a percentage point to 0.4%.Core PPI inflation, which strips out volatile food and energy prices, rose three-tenths of a percentage point to 4.6% on an annual basis. Core inflation fell slightly to 0.2% on a monthly basis.The latest inflation numbers come a day before the government is set to release the most closely watched inflation report, the consumer price index. Forecasters expect that inflation likely held roughly steady in that gauge.The bump in inflation since the start of 2026 has been driven in large part by higher energy prices, which have soared since the Iran war. Oil prices this week punched above $100 per gallon, showing that the fuel cost problems are certainly not in the rear-view mirror.The Fed’s meeting next week will be of keen interest to investors, and to Trump, who has been pushing — and even threatening — the central bank to cut rates.Fed Chairman Kevin Warsh has struck a hawkish tone as of late, emphasizing that the Fed’s priority is to drive inflation back down to the 2% level that officials consider to be healthy for the economy.The Fed also got a shot in the arm recently with a much stronger-than-anticipated jobs report, giving it more leeway to tighten monetary policy.WHAT THE AUGUST JOBS REPORT SAYS ABOUT THE ECONOMY AND TRUMPThe economy added 162,000 new payroll jobs in August, the Bureau of Labor Statistics reported Friday, as businesses shrugged off the energy supply shock from the war with Iran.The unemployment rate remained at a low 4.1%.