Fed Expects Another Rate Hike in October Amid Rising Inflation

The US Federal Reserve is likely to raise interest rates again in October as inflation pressures mount and the economy strengthens, according to Fed Governor Michael Barr. The Fed's key rate was increased last week by a quarter of a percentage point to between 3.75% and 4%, with 16 out of 18 policymakers signaling another hike before the end of the year.

Barr said that risks to achieving the Fed's inflation target have increased, while risks to the labor market have receded. He also stated that 'further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion.'

The US Composite PMI Output Index, which measures business activity, jumped to its highest level since July 2021, according to S&P Global's flash survey. The prices paid by businesses for inputs surged to nearly four-year highs.

The war in Iran is disrupting oil supplies and contributing to rising fuel prices. Brent crude futures rose about 2% to $101.09 a barrel on Wednesday, while diesel fuel fetched over $6.50 a US gallon on average. This could exacerbate price pressures as it powers equipment and trucks used in the economy.