Last inflation report before Fed makes key interest rate decision

Inflation rose 2.9 percent in August from the same time a year ago.

The latest reading from the Consumer Price Index (CPI) is the last official batch of inflation data until the Federal Reserve makes its next decision on the benchmark interest rate on September 17. 

Fed chair Jerome Powell has indicated that the central bank will lower rates as the labor market shows signs of stress. 

The Fed's 'dual mandate' is to use interest rates to balance a healthy labor market while trying to keep inflation at its goal of two percent. 

The latest CPI figures, up 0.2 percent from July, are in line with economists' expectations. 

The S&P 500 rose in pre-market trading as trader's appear to remain confident that a rate cut is still imminent.

'Even though a 25 basis point cut next week seems all but certain, the combination of firmer inflation and weaker labor market data complicates the Fed's picture going forward,' Jake Krimmel senior economist for Realtor.com said. 

'Meanwhile, last year's job gains were revised down substantially, revealing a labor market on weaker footing than initially thought,' Krimmel explained. 

Economists have been sounding the alarm at signs the jobs market is crumbling, a worrying indication of a possible recession.  

Revised data released earlier this week showed the number of jobs added to the economy for the year through March could actually be 911,000 less than previously reported.

The latest monthly report also painted a gloomy picture, with just 22,000 jobs added in August, far below Wall Street's forecast of 75,000.   

Mark Zandi, the chief economist of Moody's Analytics, said a 'labor recession' is already underway and that further revisions risk tipping the economy over a cliff.  

Zandi added that an uptick in layoffs - already up 140 percent from a year ago - would also darken the situation. 

'If businesses start laying [people] off, then I think this will not just be a jobs recession, it will be an overall economic downturn,' Zandi told Business Insider. 

Nathaniel Casey, Investment Strategist at Evelyn Partners said the latest inflation data will likely not outweigh the Fed's concern about the labor market. 

'While the full impact of tariffs remains uncertain and inflation appears to be edging higher, the Federal Reserve is likely to view this as less concerning than the recent signs of softness in the labor market, as reflected in the payrolls data,' Casey explained.  

'Against this backdrop, we expect the Fed to resume its interest rate cutting cycle at the September Federal Open Market Committee meeting next week.'