August Inflation Data to Decide Fed Rate Hike Fate

Commerzbank's Antje Praefcke believes that markets now price nearly a 70% chance of a Federal Reserve (Fed) interest rate hike in September, following Fed Chairman Kevin Warsh's hawkish speech last week.

Praefcke downplays the significance of this month's jobs report, suggesting it will not be the deciding factor for the Fed's decision on raising interest rates. Instead, she points to the upcoming August inflation data as crucial to determining whether a rate hike is necessary.

According to Praefcke, prices rose moderately in July, but could have increased sharply again in August due to rising energy costs. This would likely convince more than the three Fed members who voted for a hike at the last meeting that a rate increase is unavoidable.

Praefcke also questions whether the US dollar can benefit from a potential rate hike for long, given renewed political risks and the lack of comment from the White House on Warsh's monetary policy.