Fed Expected to Hike Rates in September Amidst Soaring Inflation

Markets are increasingly convinced that the Federal Reserve will raise interest rates by 25 basis points at its upcoming meeting in September, driven by a hotter-than-expected August inflation print.

The US Consumer Price Index (CPI) report showed core prices climbing 0.3% month-on-month, reinforcing the case for a rate hike, according to François Rimeu of Crédit Mutuel Asset Management.

Tiffany Wilding at PIMCO echoed this shift, saying her firm now expects the Fed to raise rates by 25 basis points in September, with the possibility of further hikes ahead.

However, views diverge on what happens after September. While some analysts, including Rimeu and Paris Horvitz of LBP AM, expect a second hike in December, taking rates into restrictive territory above 4% by year-end, others, such as PIMCO's Wilding, leave open the possibility that further hikes may not materialise if data continues to improve.