Prices rose 0.4% in August, the federal government said Thursday in a report that roughly aligned with expectations and keeps the Federal Reserve on track to cut interest rates.

The Bureau of Labor Statistics said the Consumer Price Index rose 2.9% on a yearly basis, a slightly hotter reading than in July.

The monthly increase in the Consumer Price Index was slightly above Wall Street estimates of 0.3%.

However, a core inflation reading that subtracts energy and food prices saw a monthly gain of 0.3% and a 12-month increase of 3.1%, putting it in line with forecasts.

The BLS said increases in shelter prices were a major factor in the increase, while indexes for medical care, recreation and communication were “among the few major indexes that decreased in August.”

On Wednesday, the Producer Price Index showed that wholesale prices declined 0.1% in August, beating Wall Street forecasts and raising expectations for a rate cut when the Fed meets next week.

The CPI rise complicated that picture, but the central bank is still expected to cut rates because of a marked slowdown in hiring.

Stocks surged following the CPI report, as investors bet the Fed was on track to reduce rates next week by at least 25 basis points, or 0.25%.

President Trump says the Fed should have acted sooner to lower rates.

However, the Fed had been reluctant to cut because it feared inflationary pressures from Mr. Trump’s trade agenda.

Inflation remains mild compared to doomsday predictions earlier in the year, emboldening Mr. Trump to pursue an aggressive trade agenda that includes a blanket 10% tariff on all imports and heftier levies on dozens of trading partners.

In late summer, the president imposed tariffs ranging between 15% and 41% on more than 67 countries, raising levies to their highest levels in over a century. He’s solidified the 10% blanket tariff on all imports and is implementing the 15% rate he negotiated with places like the European Union, Japan and South Korea.

Mr. Trump says his approach will force companies to make products in America and bring in billions in revenue for the U.S. government.

Still, ​Democratic lawmakers and some economists said the tariffs seemed to be hitting Americans in the pocketbook.

Heather Long, the chief economist at Navy Federal Credit Union, said it was noteworthy that inflation hit 2.9% in August, or “the highest since January and up from 2.3% in April.”

“The middle-class squeeze from tariffs is here,” she said on  X. “It’s troubling that so many basic necessities are rising in price again: Food, gas, clothing and shelter all had big cost jumps in August.”

Rep. Brendan Boyle of Pennsylvania, the top-ranking Democrat on the House Budget Committee, called Mr. Trump a “con artist.”

“He promised to lower prices, but his reckless policies keep driving them higher,” Mr. Boyle said. “The only promises he has kept are to his billionaire buddies — everyone else is left paying the price.”

• Tom Howell Jr. can be reached at thowell@washingtontimes.com.