Citi Sees Dovish Hike as Fed Prepares to Tackle Inflation

Citi Research expects the Federal Reserve to raise interest rates next week in response to recent inflation data. The bank forecasts a 'dovish hike' of 25 basis points, bringing the benchmark rate to a range of 3.75% to 4%. This move would not necessarily signal the beginning of a long series of rate increases.

The decision comes after core consumer prices rose slightly more than expected in the latest reading. Citi believes the figure indicates a similar monthly increase in core PCE inflation, which is the Fed's preferred measure for tracking price pressures.

Oil prices have also risen recently, adding another layer of concern for policymakers. The combination of firm inflation and higher oil prices may give officials enough support for a 25 basis point increase, but the decision is not certain.