Consumer prices dipped in August

Inflation remained modest in August as gasoline prices fell sharply, giving the Federal Reserve another reason to delay a hike in interest rates at a key meeting that begins Wednesday.

The consumer price index dipped 0.1%, the Labor Department said Wednesday, in line with economists' estimates. Prices are up.a meager 0.2% the past year.

Excluding volatile food and energy costs, so-called core prices that the Fed monitors closely picked up a tepid 0.1%, also matching economists projections. Core prices are up 1.8% the past year.

Gasoline prices tumbled 4.1%, while used cars and trucks fell 0.4% and airline fares dropped 3.1% after a 5.6% decline in July.

Offsetting those were a 0.2% rise in food prices, and 0.3% increase in both rent and apparel costs.

The Fed is struggling to decide whether to raise its benchmark interest rate for the first time in nine years as the U.S. economy and labor market continue to post solid gains while a slowdown in China and market volatility have increased the risk that a premature rate increase further roils stocks and derail growth.

Weak inflation below the Fed's annual 2% target has provided the central bank little urgency to act, but Fed officials have said that's partly because of the transitory effects of low oil and gas prices. Yet even core inflation has been meager, partly because of a strong dollar that's holding down import prices for U.S. consumers. Many economists expect the greenback to stabilize by next year.

Fed policymakers have said they don't need to see wage and price gains accelerate to boost interest rates, but must be confident inflation will pick up in the medium term. Sharply falling unemployment, which at 5.1% is already at the Fed's long-run target, could foreshadow stronger inflation in coming months as employers bid up wages.

"Once the impact of the stronger dollar and lower commodity prices fade next year, there is still every reason to expect inflation to accelerate, particularly when the economy is apparently already close to full employment," economist Steve Murphy of capital economics wrote in a note to clients Wednesday.