Are U.S. interest rates heading higher? Investors should find out in the next few days after digesting a pair of crucial updates on inflation.

The Federal Reserve is weighing whether to raise borrowing costs after a surge in inflation since the spring, when the U.S. attacked Iran and oil prices spiked. The latest reports on consumer and wholesale prices in August are primed to be the deciding factors.

The key is how much the consumer-price index (CPI) rose in August, but investors won’t take the headline number at face value. Higher oil prices are the chief reason an outsize 0.4% increase is expected.

Instead, Wall Street is focused a category known as the core rate of inflation. The core CPI omits energy and has proven to be a better predictor of long-run trends in U.S. inflation.

Economists polled by the Wall Street Journal predict a 0.2% increase in the core CPI when the report comes out Friday morning.

Normally, such an increase would be seen as mild — that is, not an invitation for the Fed to raise rates. Yet the Fed is under even more pressure now to do something after the rate of inflation bounced back above 3% earlier this year.

The Fed has been trying and failing for more than five years to reduce the rate of inflation to its 2% annual goal, causing angst among top officials.

“With inflation above target for a protracted period, there is a risk of broader price pressures taking hold,” Fed governor Michael Barr said last week.

Not so cut and dry

Still, there’s no magic number for the core CPI that guarantees the Fed’s next move — and there’s lots of moving parts.

A small increase of 0.1% or less in the core CPI could sway the central bank to stand pat. A hotter rise of 0.3% of more, on the other hand, would seem to cement a rate hike.

A 0.2% increase in the core CPI in August, meanwhile, could keep the uncertainty alive. Some economists predict such an increase will lead to a increase, but others say the Fed would likely stay on hold.

“Financial markets remain genuinely divided over whether the [Fed] will raise rates at next week’s September meeting, an unusual state of uncertainty this close to a decision date,” said Matthew Ryan, head of market strategy at global financial-services firm Ebury.

The devil will be in the details of the report — and the cost of housing could tilt the scales.

Increases in rents and home prices have slowed recently and point to lower U.S. inflation ahead, especially if oil prices ease again. Housing is the single biggest expense for most people.

If the downward trend in housing remains intact, the Fed might be inclined to do nothing.

Still, the central bank can’t entirely ignore energy. The cost of a barrel of oil has risen back to the mid-$90 range from less than $70 in July, putting more upward pressure on inflation.

Indeed, the headline CPI is expected to rise a frothy 0.4% in August. The annual rate is on track to stick close to its current level of 3.4% — way too high for the Fed.

By contrast, the core CPI is expected to slow to a 2.4% yearly pace from 2.5% in July, and perhaps go even lower. That might be enough to justify no rate hike to a majority of the 12 Fed officials who have a vote.

Even so, the Fed is unlikely to stand down given the recent rebound in oil prices and a new slate of Trump tariffs.

Inflation in the pipeline

That’s why the producer-price index, which tracks wholesale costs, could play a bigger role than usual in shaping the Fed’s decision. The August PPI comes out Thursday, a day earlier than the consumer-price index.

Wholesale prices reflect what businesses pay for supplies to produce their goods and services. Think auto parts for carmakers, fertilizer for farmers or meat and cheese for restaurants.

Rising wholesale prices tend to herald higher prices for consumers.

As with the CPI, the headline increase in wholesale prices is likely to surge again in August due to higher energy costs. The core PPI will be less alarming, but still on the hotter side.

Both indexes are likely to show wholesale inflation rising around 5% a year.

Taken together, the two price barometers should give a clearer idea of whether inflation is speeding up again — or stalling out.

Wall Street is not all that optimistic .

Some 60% of interest-rate traders believe top Fed officials will raise their benchmark short-term interest rate at their Sept. 15-16 meeting. A smaller 40% think they will stand pat, according to CME FedWatch.