WASHINGTON (Reuters) – U.S. producer prices unexpectedly rose in August and underlying producer inflation rebounded, but the data on Wednesday did not change financial market expectations that the Federal Reserve will cut interest rates again next week to support a slowing economy. Fed Chair Jerome Powell reiterated last week that the U.S. central bank would continue to act “as appropriate” to keep the longest economic expansion in history on track. The Fed lowered borrowing costs in July for the first time since 2008. The Labor Department said its producer price index for final demand edged up 0.1% last month as a jump in the cost of services offset the largest drop in the price of goods in seven months. The PPI gained 0.2% in July. In the 12 months through August, the PPI advanced 1.8% after increasing 1.7% in July. Economists polled by Reuters had forecast the PPI would be unchanged in August and rise 1.7% on a year-on-year basis. Excluding the volatile food, energy and trade services components, producer prices jumped 0.4% last month after dipping 0.1% in July, the first decline since October 2015. The so-called core PPI climbed 1.9% in the 12 months through August after increasing 1.7% in July. The Fed, which has a 2% annual inflation target, tracks the core personal consumption expenditures (PCE) price index for monetary policy. The core PCE price index rose 1.6% on a year-on-year basis in July and has undershot its target this year. U.S. Treasury yields rose and U.S. stock index futures pared gains slightly after the release of the PPI data. The dollar .DXY was trading higher against a basket of currencies. RATE CUT IN THE BAG Financial markets have fully priced in a rate cut at the Fed’s Sept. 17-18 policy meeting against the backdrop of simmering trade tensions between the United States and China that have soured business confidence and tipped both U.S. and global manufacturing into recession. U.S. tariffs on Chinese goods were this month broadened to include an array of consumer goods. There are fears the manufacturing downturn could spill over into the broader economy and derail the economic expansion now in its 11th year. The economy is being supported by robust consumer spending via a strong labor market. In August, wholesale energy prices fell 2.5% after rebounding 2.3% in the prior month. They were weighed down by a 6.6% drop in gasoline prices, the most since January, which followed a 5.2% percent jump in July. Goods prices declined 0.5% last month, also the largest drop since January, after rising 0.4% in July. Energy prices accounted for more than 80% of the drop in the cost of goods in August. Wholesale food prices fell 0.6% in August after gaining 0.2% in the prior month. Core goods prices were unchanged last month. They edged up 0.1% in July. The cost of services increased 0.3% after decreasing 0.1% in July. Services were boosted by a 6.4% surge in the cost of guestroom accommodation such as hotels and motels, the largest gain since April 2009. The cost of healthcare services rose 0.2% last month after edging up 0.1% in July. Hospital inpatient care prices increased 0.4% and the cost of doctor visits shot up 0.5%, reversing July’s 0.5% decrease. But the cost of hospital outpatient care dipped 0.1%. Portfolio management fees increased 0.5% after rebounding 0.8% in July. Those fees and healthcare costs feed into the core PCE price index.