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Rising inflation and a deteriorating job market puts the Fed and Americans in a difficult spot

WASHINGTON (AP) — Inflation rose last month as the price of gas, groceries and airfares jumped while new data showed applications for unemployment aid soared, putting the Federal Reserve in an increasingly tough spot as it prepares to cut rates at its meeting next week despite persistent price pressures.
Consumer prices increased 2.9% in August from a year earlier, the Labor Department said Thursday, up from 2.7% the previous month and the biggest jump since January. Excluding the volatile food and energy categories, core prices rose 3.1%, the same as in July. Both figures are above the Federal Reserve’s 2% target.
A separate government report Thursday showed that weekly applications for unemployment aid jumped 27,000 to 263,000, the highest in nearly four years. Requests for jobless benefits are a proxy for layoffs. Recent reports have also showed that hiring has weakened dramatically this year and was lower than previously estimated last year.
The data raises the specter of “stagflation,” a trend that last bedeviled the U.S. economy in the 1970s. The term refers to a period of slower growth, higher unemployment along with rising inflation. It is unusual because a weak economy typically keeps inflation in check.
Such a scenario could create major headaches for the Fed as it prepares for a meeting next week, when policymakers are widely expected to cut their short-term rate to about 4.1% from 4.3%. The Fed is under relentless pressure from President Donald Trump to cut rates. At the same time, stubborn inflation while the job market is weakening is difficult for the central bank because they are diverging trends that require polar reactions from Fed policymakers to address.
Typically the Fed would cut its key rate when unemployment rises to spur more spending and growth. Yet it would do the opposite and raise rates — or at least keep them unchanged — in the face of rising inflation.
Last month, Chair Jerome Powell signaled that Fed officials are increasingly concerned about weaker hiring, setting the stage for a rate cut next week. Wall Street investors think there is an 85% chance the Fed will cut twice more after that, according to futures pricing tracked by CME Fedwatch.
“Consumer inflation came in mildly hotter than forecast, but not nearly high enough to prevent the Fed from starting to cut rates next week,” Kathy Bostjancic, chief economist for Nationwide, said. “The labor market is losing steam and reinforces that the Fed needs to start cutting rates next week and that it will be the start of a series of rate reductions.”
Where inflation heads next is a key question for the Fed. While Thursday’s report showed inflation picked up, data released Wednesday suggested prices at the wholesale level are cooling. Economists also noted that a separate measure of inflation that the Fed prefers, which will be released in about two weeks, should come in lower than Thursday’s figures and paint a more benign picture of prices.
On a monthly basis, overall inflation accelerated, rising 0.4% from July to August, faster than the 0.2% pace the previous month. Core prices rose 0.3% for the second straight month.
Many economists and some key members of the Fed think that the current pickup in inflation reflects one-time increases from Trump’s sweeping tariffs and won’t lead to a lasting inflationary trend. They argue that a weaker job market will hold down wages and force companies to keep prices in check.
Subadra Rajappa, head of U.S. rates strategy at Societe Generale, said that while inflation was elevated last month, there were also signs that the cost of services moderated, suggesting that outside of tariffs, prices are cooling.
Yet Joe Brusuelas, chief economist at RSM, a tax and consulting firm, says that higher-income households are still spending sufficiently to push some prices higher, such as hotel and airfare costs, which leapt last month. Such spending could keep inflation stubbornly high even in a weak job market, he said.
“The Fed’s getting ready to cut into a sustained increase in prices,” he said. “Very unusual spot. … we can see tariff induced inflation in a slow, steady and methodical manner.”
Goods prices picked up last month, a sign Trump’s sweeping tariffs are pushing up costs. Gas prices jumped 1.9% just from July to August, the biggest monthly increase since a 4% rise in December. Grocery prices climbed 0.6%, pushed higher by more expensive tomatoes, apples, and beef. Rental costs also increased, rising 0.4%, faster than the previous month.
Clothing costs rose 0.5% just last month, though they are still just slightly more expensive than a year ago. Furniture costs rose 0.3% and are 4.7% higher than a year earlier.
Some restaurant owners have boosted prices to offset the rising costs of food. Cheetie Kumar, who owns Mediterranean eatery Ajja in Raleigh, North Carolina, said she’s facing higher costs on everything ranging from spices she imports from India, coffee and chocolate she gets from Brazil, and soy she gets from Canada.
“Those are things that I cannot source locally, we do source a lot of produce and meat and everything else from local farmers, but I don’t know any nutmeg growers in North Carolina,” she said.
Her overall costs are up about 10% from a year ago, with beef costs up 7%, and much bigger increases for things like coffee, chocolate (300%) and spices (100%).
She’s raised prices on some of her menu items by $1 or $2, but said she’s at the limit of how much she can do so before demand wanes and she stops earning a profit.
Bigger companies are also feeling the pinch.
E.L.F. Cosmetics said this spring that it was raising prices by $1. Last month, however, CFO Mandy Fields said it is no longer certain whether the $1 price increases will be enough to offset rising tariff costs.
Shoppers have yet to feel the big sting that economists had predicted earlier in the year. Many retailers ordered goods ahead of tariffs and have also absorbed a big chunk of the costs rather than passing them along to consumers, who’ve grown increasingly leery of price increases.
But Walmart and other big chains have warned of costs increases as they replenish their inventories, with the full impact of tariffs in effect.
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AP Business Writer Anne D’Innocenzio contributed from New York. AP Business Writer Mae Anderson contributed from Nashville.
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Senate Republicans trigger ‘nuclear option,’ changing rules to speed up Trump nominees

WASHINGTON — Republicans triggered the “nuclear option” to change the rules of the Senate on a party-line basis Thursday, a move that will allow them to speed up confirmation of President Donald Trump’s nominees for key executive branch positions.
The vote was 53-45 to establish a new rule that allows the Senate to confirm an unlimited number of nominees en bloc, rather than process each one individually.
The rule applies to executive branch nominees subject to two hours of Senate debate, including subcabinet picks and ambassadors. It will not affect judicial nominations. Republicans say they’ll allow their own senators to object to individual nominees in any given block, but the rule will strip away the power of the minority party to do the same thing.
Senate Majority Leader John Thune, R-S.D., initiated the process by bringing up a package of 48 Trump nominees, which under longstanding rules has been subject to the 60-vote threshold. The vote to advance them failed due to Democratic opposition. Then, Thune sought to reconsider and Republicans subsequently voted to overrule the chair, setting a new precedent and establishing the new rule.
Thune had telegraphed the move for weeks, accusing Democrats of creating an “untenable situation” with historic obstruction of Trump’s nominees. The vote was held up for hours on Thursday as the two parties engaged in last-ditch negotiations to strike a deal to avoid a rules change.
But they failed. And Republicans chose to proceed.
“It’s time to move. Time to quit stalling. Time to vote. Time to fix this place,” Thune said in an impassioned floor speech, accusing Democrats of stalling and dragging out negotiations. “This is a broken process, folks. That’s an embarrassment.”
Thursday’s vote sets up a fast track for confirmation of that initial bloc of 48 Trump nominees, including former Rep. Brandon Williams, R-N.Y., to be undersecretary for nuclear security, as well as Kimberly Guilfoyle and Callista Gingrich to be ambassadors to Greece and Switzerland, respectively.
Senate Minority Leader Chuck Schumer, D-N.Y., said his party was reacting appropriately to Trump’s “historically bad nominees,” a trend he predicted would worsen with the GOP’s rule change.
“This move by Republicans was not so much about ending obstruction, as they claim; rather, it was another act of genuflection to the executive branch… To give Donald Trump more power and to rubber-stamp whomever he wants whenever he wants them, no questions asked,” he said.
He also predicted that Republicans would come to regret it.
“This is a sad, regrettable day for the Senate,” he said. “And I believe it won’t take very long for Republicans to wish they had not pushed the chamber further down this awful road.”
The vote Thursday makes a far-reaching change to the rules that will tear down hurdles for Trump — and future presidents — to rapidly push their nominees through the Senate.
Moments later, Senate Republicans used their modified rule to formally advance the package of 48 nominees on Thursday, with the goal of confirming them all next week.
The tool they used is known as the nuclear option because senators typically prefer to avoid it. But over the last decade and a half, it has been used by both parties to erode the powers of the Senate minority — by nixing the 60-vote threshold for confirming judges and cutting debate time for some nominees.
Although nominations are the prerogative of the Senate, House Republicans have watched the battle with interest and pushed for faster confirmation of Trump’s nominees.
Sen. Katie Britt, R-Ala., gave a presentation on the rules change proposal Wednesday to a group of House Republicans, according to a source with direct knowledge of the matter.
Sen. Brian Schatz, D-Hawaii, who had spearheaded an effort to find an agreement that would avoid the nuclear option, said there wasn’t total agreement to proceed with it.
But he said he was happy to have tried.
“We don’t have unanimous consent, we do not have unanimity,” he said on Thursday before the vote. “It’s a damn shame, and maybe this exercise builds a little muscle memory for at least exploring how to have a bipartisan negotiation. So maybe there’s some silver lining to this.”
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Trump administration requests emergency ruling to remove Cook from Fed board

WASHINGTON (AP) — The Trump administration has asked an appeals court to remove Lisa Cook from the Federal Reserve’s board of governors by Monday, before the central bank’s next vote on interest rates.
The request represents an extraordinary effort by the White House to shape the board before the Fed’s interest rate-setting committee meets next Tuesday and Wednesday. At the same time, Senate Republicans are pushing to confirm Stephen Miran, President Donald Trump’s nominee to an open spot on the Fed’s board, which could happen as soon as Monday.
Trump sought to fire Cook Aug. 25, but a federal judge ruled late Tuesday that the removal was illegal and reinstated her to the Fed’s board. Trump has accused Cook of mortgage fraud because she appeared to claim two properties as “primary residences” in July 2021, before she joined the board. Such claims can lead to a lower mortgage rate and smaller down payment than if one of them was declared as a rental property or second home. Cook has denied the charges.
On Tuesday, U.S. District Court Judge Jia Cobb ruled that the administration had not satisfied a legal requirement that Fed governors can only be fired “for cause,” which she said was limited to misconduct while in office. Cook did not join the Fed’s board until 2022.
In their emergency appeal, Trump’s lawyers argued that even if the conduct occurred before her time as governor, her alleged action “indisputably calls into question Cook’s trustworthiness and whether she can be a responsible steward of the interest rates and economy.”
The administration asked an appeals court to issue an emergency decision reversing the lower court by Monday. If their appeal is succesful, Cook would be removed from the Fed’s board until her case is ultimately resolved in the courts, and she would miss next week’s meeting.
If the appeals court rules in Cook’s favor, the administration could seek an emergency ruling from the Supreme Court.
Either way, the Fed is expected to cut its benchmark interest rate next week by a quarter-point to about 4.1%. When the Fed reduces its key rate, it often, over time, lowers borrowing costs for mortgages, auto loans, and business loans. Some of those rates have already fallen in anticipation of cuts from the Fed.
Should Miran, a top economic adviser to Trump, win approval in time to join the Fed next week, he could push for a steeper half-point reduction to the Fed’s rate.
Yet there are 12 officials who vote on whether and by how much to cut, including the seven members of the Fed’s board as well as five of the Fed’s 12 regional bank presidents, who vote on a rotating basis.
Trump’s two other appointees to the Fed — Christopher Waller and Michelle Bowman — might also support a half-point cut, but several of the Fed’s bank presidents have expressed concern about stubbornly elevated inflation and would almost certainly oppose such a large reduction.
If the Fed approves a quarter-point cut, it is possible there could be dissenting votes both from officials who preferred no cut and from those who support a half-point.
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Kawhi Leonard Reportedly Got Aspiration Payment Days After Clippers’ Wong Invested

In December 2022, Kawhi Leonard reportedly received a quarterly payment for his endorsement deal with Aspiration days after Los Angeles Clippers vice chairman Dennis J. Wong made an investment as the company was heading toward bankruptcy.
On the latest episode of Pablo Torre Finds Out (starts at 22:05 mark), newly obtained documents obtained by Pablo Torre showed Leonard received a $1.75 million payment from Aspiration nine days after a company registered to Wong made a $1.99 million wire transfer to Aspiration.
According to a company bank statement obtained by Torre, the investment in Aspiration from Wong’s DEA 88 Investments LLP occurred on Dec. 6, 2022. Leonard’s payment from aspiration was transferred on Dec. 15.
In the original reporting from Torre released last week, Leonard—through his KL2 Aspire LLC—agreed to a four-year, $28 million endorsement deal with Aspiration in April 2022. The deal came eight months after he signed a four-year, $176.3 million contract to remain with the Clippers in free agency.
Torre reported there’s no evidence that Leonard did any promotion for Aspiration, which received an initial $50 million investment from Clippers governor Steve Ballmer, and one anonymous employee who worked for the company said the endorsement deal was done to “circumvent the salary cap.”
In the new report released on Thursday, Torre, citing sources and a review of Aspiration’s cap table and bank statements, noted there’s no public evidence indicating Wong or his company had ever invested in Aspiration prior to December 2022.
It was also pointed out by Torre that Wong’s investor agreement with Aspiration presented him with detailed formal disclosures that the company was in default, was being sued for millions of dollars and facing inquiries from government agencies.
According to Torre’s reporting, documents from the agreed-upon deal between KL2 and Aspiration required quarterly payments of $1.75 million. The reported investment from Wong came after Aspiration had failed to satisfy the third quarter payment owed no later than Sept. 30, 2022.
Per ESPN’s Ramona Shelburne, the Clippers announced in September 2021 a $300 million partnership with Aspiration. The deal came with a sponsorship in their new arena and a patch on the jerseys.
Aspiration filed for Chapter 11 bankruptcy on March 31, 2025.
In response to Thursday’s report, Wong did not respond to Torre’s questions about the investment, while the Clippers provided a statement.
“The details of our relationship with Aspiration are under NBA investigation, but it is clear the company was a house of cards that defrauded Steve and many others,” the Clippers said. “We look forward to sharing the facts with the league and providing them with all the information they need.”
In an interview with Shelburne on Sept. 5, Ballmer denied allegations that the Clippers did anything to try circumventing the NBA salary cap and accused Aspiration of fraud.
“These were guys who committed fraud,” Ballmer added. “…They conned me. I made an investment in these guys thinking it was on the up and up and they conned me.”
The Clippers issued a statement denying that anyone in the organization, including Ballmer, were involved in any attempt to circumvent the salary cap.
Ballmer did say he set up in the introduction between Aspiration and Leonard, but that was as far as his involvement went.The NBA did confirm on Sept. 3 it had opened an investigation into the situation.
NBA commissioner Adam Silver told reporters on Wednesday he “never heard a whiff of anything” about Leonard, the Clippers and potential cap circumvention.
The NBA previously investigated the Clippers in 2020 over allegations that they violated league rules in recruiting Leonard when he was a free agent in the summer of 2019. They were ultimately cleared, as the league found no evidence of any wrongdoing.
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