Inflation report lands amid spiking oil prices, rising interest rates and Fed on fence

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Inflation report lands amid spiking oil prices, rising interest rates and Fed on fence

2026-09-11 12:00 Last Updated At：12:11

WASHINGTON (AP) — Friday's inflation report is shaping up to be among the most consequential in years.

Oil and gas prices have spiked again on the back of renewed combat in the Middle East. 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. And longer-term interest rates jumped Thursday, partly because of fears of higher inflation, pushing mortgage borrowing costs higher.

The Trump administration is seeking to counter voter concerns about high prices and rising interest rates as the midterm elections approach. President Donald Trump on Wednesday 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. And Treasury Secretary Scott Bessent has stepped up buybacks of Treasury bonds in an effort to keep longer-term interest rates lower. Yet on Thursday the yield on the 10-year Treasury reached a nearly three-year high.

On Friday, the government is expected to report that headline inflation ticked down last month, to 3.3% from 3.4%, according to data provider FactSet, though that is still above the Fed's 2% target. And higher gas prices will likely push inflation back up next month when September's data is released.

On a monthly basis, prices are forecast to have risen 0.4% from July to August, a pace that if it continues would keep inflation far above 2%.

Excluding the volatile food and energy categories, 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 year-over-year figure would be down slightly from 2.5% in July.

Yet 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, and diesel fuel prices have reached all-time highs.

Many economists and Federal Reserve officials have long considered higher gas prices one of several “one-time” shocks that are lifting inflation, along with tariffs and surging investment in AI data centers. For months, the hope has been as that as the war against Iran wound down, and the effects of tariffs faded, inflation would grind lower.

Yet there are few signs of the Iran war cooling, and even Trump has said gas prices won't retreat until after the midterm elections in November. And while Trump's trade fight with Canada will impact a small number of imports, it is a reminder that tariffs remain a threat that could push up other costs.

“This is not one and done,” said Kathy Bostjancic, chief economist at Nationwide. “It's unclear when tensions in the Middle East are going to settle down. ... This seems like it could be a prolonged disruption.”

While core prices are rising more slowly than overall prices, more expensive oil and gas could spread through more of the economy. Pricier jet fuel will likely push up air fares, and more expensive diesel will raise shipping costs, which could make groceries and other goods shipped by truck more expensive. On Thursday, a wholesale price report showed a jump in chemical prices, likely a result of more expensive oil.

Federal Reserve policymakers are split on whether to hike at a meeting next week, so much so that differences of a few hundredths of a percentage point in Friday's inflation report could determine whether the central bank boosts its benchmark interest rate or leaves it unchanged. The Fed, which is tasked with keeping inflation in check, typically lifts borrowing costs to slow spending and limit price increases.

Investors and analysts differ over whether the Fed will hike rates at their Sept. 15-16 meeting. Chair Kevin Warsh suggested he was leaning toward a rate hike in a high-profile speech two weeks ago, but he did not commit to doing so at a specific time.

And last Thursday, Fed governor Christopher Waller, echoing some other Fed officials, suggested that if Friday’s inflation report shows price increases cooling, then he would support keeping rates where they are. Waller is one of the 12 officials who vote on each Fed rate decision.

Waller's heavy emphasis on August's figures have raised the stakes for Friday's report. If the monthly core figure rounds up to 0.3%, some Wall Street analysts expect the Fed would then hike rates. But if it rounded down to 0.2% or lower, then a hold could be more likely. If it is somewhere in between, it's not clear what the Fed may do. One analyst called such considerations “ludicrous precision.”

For his part, Warsh doesn't want to tip his hand about his next moves, which some economists say will make this kind of uncertainty more common before Fed meetings.

Trump and Vance team up at GOP convention as party faces midterm risks, and eyes what's next

DALLAS (AP) — President Donald Trump and his Vice President JD Vance teamed up Thursday to close out the second and final night of the Republicans’ midterm convention in Dallas, imploring voters to stick together to save their party’s majorities in Congress.

Republicans know they are up against history, which traditionally rebuffs the party in power during midterms, but they're relying on Trump’s personal appeal to voters. Vance, with a primetime speaking slot right before the president, was widely watched as a potential heir to the “Make America Great Again” movement.

Trump organized the convention hoping to rally voters who turn out for him, but not for other candidates.

“You got to do me the biggest favor you’ve ever done,” Trump told the crowd. “You’ve got to do this for me.”

At one point he led the crowd in a repeat-after-me pledge to swear to vote on Nov. 3.

Vance delivered searing criticism of Democrats, calling them “the party of hatred.” And even though Republicans have faced their own rifts over Trump's war in Iran and other issues, he urged them to remain united for the midterms.

“Don’t give the country over to a bunch of crazy people because you happen to disagree with us on a policy issue here or there,” he said.

Republicans face a potential reckoning this fall. They are struggling to bolster enthusiasm for congressional candidates and laboring to overcome voters’ concerns about the economy and the war with Iran. While many Republicans skipped the confab at American Airlines Center, others still see solidarity with Trump as their best shot at winning, despite the president’s low approval rating.

Republicans spent two consecutive nights denouncing Democrats as extremists, and Trump capped Wednesday by making the outlandish promise of $5,000 to each American adult if his party wins in November. Such a proposal could cost more than $1 trillion and was roundly panned — even by some Republicans.

As the convention ended, Cheryl McClure of Mansfield, Texas, said she hopes her party's fortunes improve.

“People are talking about what’s happening at the grocery store, and are understandably still afraid, but things are getting better, and it’s our job to spread the word,” she said. “The emotion coming out is good to drive us forward into November.”

House Democrats blasted the Republicans’ convention as an opulent spectacle for an out-of-touch president.

“Donald Trump does not care about the average American family or about affordability," said Rep. Robert Garcia, D-Calif.

Protesters chanting “say it loud, say it clear, Donald Trump’s not welcome here” marched down streets, but were stopped by police from getting too close to the site.

Vance’s keynote offered hints about his political aspirations, as he spoke about his own family, his wife, Usha, who recently gave birth to their fourth child, and his vision for the country. He has not yet said if he will run in 2028.

When a protester with a Mexican flag interrupted his speech, Vance won an extended roar of approval with his sharp response.

“Well, my friend, if you love Mexico so much, get your a— over there. I’ll buy you a plane ticket,” he said.

"We got to send a message this November,” Vance said. “This country was handed down to us by our parents and their parents before them. We received this national birthright, and we are going to fight for it by electing Republicans this November.”

The vice president, who also serves as the Republican National Committee’s finance chair, raised $2 million for the party earlier Thursday at a fundraiser in Dallas, according to a person familiar with the event who was not authorized to discuss it publicly and spoke on condition of anonymity.

Trump is also deploying his cash in key midterm races. No Going Back PAC Inc., which, according to a person with knowledge of the situation, is connected to Trump’s MAGA Inc., has reserved more than $68 million for advertising. The person was not authorized to speak publicly about the funding arrangement.

Coming on the eve of the 25th anniversary of the Sept. 11, 2001, attacks, the evening solemnly marked that moment. It also produced a video tribute to Charlie Kirk, who co-founded the conservative group Turning Point USA. He was assassinated one year ago.

“His voice has only grown louder,” said Lucas Miles, a pastor and vice president at Turning Point. The president's son, Donald Trump Jr., drew chants of “USA!” as he honored Kirk and criticized Democrats.

At one point, Rep. Mike Lawler, who is fighting to win reelection in New York, appeared onstage with the family of Sheridan Gorman who was fatally shot in Chicago and officials have charged a man they say was illegally in the country. They presented a bench in her honor as a place where lawmakers can sit to discuss issues.

In a lighter moment, Marty O’Donnell, a composer who is challenging a House Democrat in Nevada, got the crowd to sing along to the earworm jingle he wrote for Flintstones vitamins.

The night's themes delved into what House Speaker Mike Johnson calls the “Contrast for America,” as Republicans showcased what they call their “Big Beautiful Bill” of tax breaks and spending cuts and warned of a bleak future if Democrats take control.

The campaign slogan is a throwback to another Republican leader, Newt Gingrich, who offered a Contract with America. This time, rather than presenting a detailed list of priorities, Republicans are quick to portray all Democrats as in line with their most liberal candidates, some backed by the Democratic Socialists of America, and focused on investigating the Trump administration.

“It truly is a contrast between common sense and crazy,” Johnson said. “We cannot and we will not allow them to take the majority in Congress.”

With the Republican majorities in the House and Senate both at risk this fall, the president’s agenda for his final two years in office is also at stake. The margins in Congress are expected to be narrow, with a few seats in a shrunken map of competitive races determining the outcome.

Presidents past have acknowledged their midterm losses — Barack Obama called his 2010 setbacks a “shellacking,” George W. Bush labeled his a “thumping.”

But Trump often refuses to accept defeat, including his false claims that he, rather than Joe Biden, won the 2020 election. One of the many people he pardoned for their actions in the Jan. 6, 2021, attack on the Capitol, former Oath Keepers leader Stewart Rhodes, appeared at the convention.

The night closed with a slow-motion balloon drop that typically falls on a presidential nominee at party conventions, and Trump lingered onstage to enjoy operatic singing from his favorite tenor.

Mascaro reported from Washington. Associated Press writers Jill Colvin, Thomas Beaumont and Jamie Stengle in Dallas, Will Weissert, Steven Sloan and Aamer Madhani in Washington, JJ Cooper in Phoenix, Bill Barrow in Atlanta, Marc Levy in Harrisburg, Pennsylvania, Mike Catalini in Morrisville, Pennsylvania, Hannah Fingerhut in Des Moines, Iowa, and Sarah Rankin in Richmond, Virginia, contributed to this report.