Fed Expected to Raise Interest Rates as Inflation Concerns Mount

The Federal Reserve is widely expected to raise interest rates this week, following a strong inflation report last Friday. The market has priced in a nearly 90% probability of a rate hike, with interest rate futures prices reflecting this expectation.

Just last Thursday, many investment banks still expected the Fed to keep interest rates unchanged for the year. However, Goldman Sachs and Citigroup have revised their forecasts, now expecting a 25-basis-point rate hike at this week's FOMC meeting.

According to Nick Timiraos, almost all Fed watchers who did not previously expect a September rate hike changed their forecasts after the August CPI data came in slightly higher than expected. The consensus among investment banks is that the Fed will raise interest rates two to three times this year.