New Delhi, Sept. 11 -- Federal Reserve Chair Kevin Warsh faces his first major test next week as markets bet on a rate hike on September 16, even as President Donald Trump pressures the central bank to cut borrowing costs.

The dilemma has become sharper after back-to-back inflation readings pointed to renewed price pressures. The Consumer Price Index increased 0.4% last month after edging up 0.1% in July, the Labor Department's Bureau of Labor Statistics said. In the 12 months through August, consumer inflation advanced 3.4%.

The data have pushed markets further towards a rate hike. Soon after the CPI data was published on Friday, financial markets priced in a roughly 91% chance of a rate hike next week, up from about 72% on Thursday, a...