Inflation Held Steady in August, Pushing the Fed Towards a Rate Hike

The latest data show inflation stayed high last month, putting pressure on the Fed to raise interest rates next week. Plus, 25 years after the September 11th terrorist attacks, many of the security measures established in its aftermath are still with us. They really wanted to standardize security at airports, make it a government's function. And Anthropic says Iran used its AI to target American forces. It's Friday, September 11th. I'm Alex Oseleff for The Wall Street Journal. This is the p.m. edition of What's News, the top headlines and business stories that move the world today. A new report out from the Labor Department today showed that the inflation rate held steady at 3.4 percent in August. That was in line with analyst expectations, but is higher than the Fed's 2 percent target, which is likely to have big implications for the central bank's meeting next week. WSJ economics reporter Justin Lehart is here with more on the numbers. Justin, overall inflation was at 2.4 percent at the start of the year, and it was expected to cool. Why didn't that happen? What is keeping inflation so high? Well, I mean, the biggest thing is just energy prices. With the war in Iran, we've seen gasoline prices shoot up. If you drove down the highway today, you would see diesel prices above six bucks, which is a new record. There may still be some lagged effects from tariffs. And then also the AI buildout is pushing prices higher for some goods, particular things that have like DRAM memory. You know, we saw this week that Apple came out with their new phone that's going to cost $1,999. And we know that that price was boosted by these memory costs. You know, it's not what the Fed wanted to see this year. I have to think that this reading puts pressure on the Fed to raise rates next week. How certain are investors? How certain are investors and analysts that this is going to happen? They're pretty certain at this point. Something could happen over the weekend, I suppose. But, you know, it could be concerning if they didn't raise rates. People will be wondering what happens if inflation stays elevated. It's very hard to raise rates at the October meeting since it comes right before the midterm elections, waiting around until December, you know, and then maybe having a worse inflation situation. That is not a good look for the Fed, at a time when there's concerns that the Fed is being politicized. They really want to show their independence. And frankly, most people think they should hike. So if there's little question about the next meeting, is the question then for investors, what about future meetings? Yeah, a lot of it comes down to that. What is going to happen with energy prices in particular? Are we going to see any sort of cooling of what's going on in the Middle East? Are we going to see any sort of decline in energy prices A lot of times, you know, economists, Federal Reserve officials like to sort of look through energy prices because they're only temporary. They're an effect on inflation ultimately. But in this case, if people start to expect higher inflation, that can be self-fulfilling. You can end up with a bigger inflation problem than you would have had otherwise. All of this sort of comes into the Fed's thinking. That was WSJ economics reporter, Justin Layhart. Thank you, Justin. All right. Thank you. Taxes rallied today, adding nearly 1 percent, a signal that investors like the idea of a rate hike tamping down inflation. Brent crude futures were volatile after Saudi Arabia shut down a crucial pipeline that allowed the kingdom to continue exporting crude oil after Iran closed the Strait of Hormuz, saying it had been attacked multiple times as fighting across the Middle East flared. Brent crude futures ultimately settled just shy of $105. Anthropix says Iran used its AI models to target U.S. Navy ships in the Middle East. A report from the AI company found an Iranian-linked group compiled information from transponders and satellite photos to track American warships and look for vulnerabilities. Anthropix said it disrupted the plot. The finding was one of several threats outlined in the report that offered up a playbook of how U.S. adversaries are using AI in new ways that pose serious threats to national security, including creating new missiles and aggressiveness. Anthropix also said it was a good idea to use AI to fight the U.S. invasion of the Middle East, and trying to develop biological weapons. And Maine Republican Senator Susan Collins criticized President Trump's trade dispute with Canada. She's working closely with Trump administration officials to try to lessen the impact of the tariff fight, but in an exclusive interview with the Wall Street Journal, she said that President Trump's tone and rhetoric have been inappropriate and unhelpful. The White House didn't immediately comment. The trade war has an outsized impact in Maine, which counts Canada as its top trading partner, and complicates Collins' bid for re-election, her toughest in her nearly 30-year career. Coming up, the 9-11 remembrance ceremonies that took place today, and how airport security has evolved in the last 25 years. More after the break. America marked 25 years since the September 11th attacks, at Remembrance Ceremonies today, honoring the nearly 3,000 people killed in the deadliest terrorist attack on U.S. soil. At a wreath-laying ceremony at the Pentagon, President Trump said the days following the attacks showed the country's authentic spirit. Today we renew the sacred oath that we first swore in their names a quarter of a century ago. We will never, ever forget. In New York City, former President George W. Bush, Bill Clinton, Barack Obama, and Joe Biden attended the Ground Zero ceremony. Former New York Governor George Pataki and former New York City Mayor Rudy Giuliani, along with current Mayor Zoran Mamdani, were also there, as was Vice President J.D. Vance. In ways large and small, the 9-11 terrorist attacks have had a lasting effect on Americans' politics, economy, and psyche. A quarter-century on, travel security measures remain fundamentally changed. Many of us can't remember a time when catching a flight didn't mean putting our liquids in plastic bags and taking off our belts and jackets. But now it's starting to change again. Alison Sider covers air travel and is here to tell us more. Alison, what was the goal of these post-9-11 changes to airport security? Security has evolved a lot in response directly to 9-11 and sort of subsequent threats. It had been a patchwork of airline and airport responsibility. And they really wanted to standardize security at airports, make it a government function, and, you know, prevent terrorists from utilizing airplanes to conduct attacks. Pre-9-11, kind of anyone could go meet someone at the gate, and now really only travelers can go through airport security if you're traveling that day. We're taking our shoes off. You know, you're taking liquids out of your bag. You're taking laptops out of your bag. I remember picking my dad up, like, at the gate pre-9-11. Totally. Or we're going to pick my grandparents up. The process has just become a lot more intensive. Lines got a lot longer. Everything is more of a hassle. And, you know, of course, TSA and the government would argue that this all makes us safer, but it indisputably also sort of makes things more annoying. I was looking back at some of the journal's coverage just after 9-11, and I think it's easy for us to forget just how scared people were, particularly to fly. These security measures helped reassure people at that moment. But 25 years later, some of these restrictions are gone. are changing now. Last year, then-Department of Homeland Security Secretary Kristi Noem said travelers no longer had to take off their shoes when they go through airport security. Why make this change now, and what are some of the other things that changed? The shoe rule has always been pretty unpopular. It's blamed for clogging up lines. Everyone sort of hates dealing with it. That actually was implemented a couple years after 9-11. It was in response to Richard Reed, his abortive attempt to detonate a bomb that was hidden in his shoe. On a flight, the administration felt that with new technology that's been deployed at many airports, that this was something that they could do that obviously would make people feel very happy, and obviously this was a pretty popular move. What does security officials make of this? Well, you know, there has been criticism internally within DHS about revoking the shoe requirements. There was an internal watchdog within the Department of Homeland Security that found that Secretary Kristi Noem hadn't really considered all the safety ramifications of removing this requirement, that some of the scanners are actually able to scan through people's shoes, and that a new security vulnerability had been created as a result of removing this requirement. We reached out to DHS for comment, and they didn't respond. When the Journal first reported this earlier this year, a spokeswoman disputed the claims and said that Noem had appropriately responded to the findings. But Allison, aside from the shoes, we've seen the rise of other ways people can speed up their security. Air travel is a more bifurcated experience, and security is just one way that that manifests. You see it obviously in the cabin, where it's the economy, it's premium economy, extra legroom, business class, first class, and that's already come to security as well. I mean, there's TSA pre-check, which is sort of like the most basic, most accessible pre-clearance option. You could do clear, which works with TSA, but they kind of take you to the front of the line. Also, at some airports, if you're, in the most premium cabin on your airline, they might have a priority lane for you. you or a specific security lane that you can go through. And at the very upper, upper echelon of things are like really luxurious remote screening terminals where they have an arrangement with TSA where they can screen you there. There is also the TSA's pilot program to do off-site security, which they did this summer in Boston. Can we expect more of this kind of thing to come, more ways to skirt the main airport security line, no matter whether you're willing to pay a little bit or a lot? Yes, the current administration and TSA in general is really interested in finding ways to alleviate pressure on the airport site to make this an easier experience. Airports are really interested in this idea because of the potential to alleviate lines. A lot of these airport terminals weren't initially designed to have huge lines building up because decades ago there weren't huge security lines. So it's been an experience challenge for airports too. TSA announced a new program that will have more people going through security, right, even if they're not traveling. It's called Gateside. It's for pre-check members. It's at 13 airports around the country. It will allow non-travelers, people without a ticket, to go to airport gates, you know, to meet a loved one or someone needs extra help. It'll be interesting to see if people actually still want to do that or if, like, our behavior has changed. And just to kind of sum things up, is it safer to fly now? Yeah. Yeah. Yeah. Yeah. Yeah. Well, I mean, there has not been another terror attack. So in some ways, it's sort of hard to argue with success. That said, we don't really know what other threats there may have been, what has been prevented and how. You hear about lapses when they happen, but we don't know every threat that may have been stopped. It is sort of hard to say definitively what has been accomplished. But, you know, it definitely does feel safer to fly. That was WSJ Reporter. Alison Zeider. Thanks, Alison. Thanks. And that's What's News for this week. Tomorrow, you can look out for our weekly markets wrap-up, What's News in Markets. Then on Sunday, we'll be discussing Defense Secretary Pete Hexeth's personnel changes to the U.S. military. That's in What's News Sunday. And we'll be back with our regular show on Monday morning. Today's show was produced by Danny Lewis with supervising producer Katie Ferguson. Michael LaValle wrote our theme music. Aisha Al-Muslim is our development producer. Chris Zinsley is our deputy editor. And Lital Mullah, who is our executive producer, is our senior director of shows. I'm Alex Osola. Have a great weekend, and thanks for listening.