Oil Price Surge Triggers Fed Rate Hike Expectations

Oil prices have surged to over $100 per barrel, sparking expectations that the US Federal Reserve will raise interest rates by 25 basis points this week.

Around 90% of respondents from trading circles surveyed by CME Group believe a rate hike is imminent, following last week's decision by the European Central Bank to increase interest rates by the same amount.

Analysts at ING noted that August inflation readings remain well above target, with core consumer prices increasing by 0.29% from July, more than double the rate needed to bring inflation down to the Fed's target of 2%.

'It's just a broader-picture question of, are you comfortable with the pace at which that inflation is coming down, or do you think a rate hike might better balance the risks around the economy,' said the chief U.S. economist at Oxford Economics.