Fed Faces Inflation Pressure Ahead of Interest Rate Decision

The Federal Reserve is set to make its next interest rate decision on Wednesday as inflation continues to rise. The Iran war has led to soaring price increases, driving up energy costs and pushing inflation to a three-year high of 3.5%. Fed Chair Kevin Warsh has vowed to slash inflation to the desired level of 2%, saying 'persistently high prices are a burden for the American people.'

Despite a preliminary peace agreement in June, on-again, off-again fighting in recent weeks has rekindled crude prices. Oil costs account for a large share of the price of auto gasoline, which currently stands at $4.11 per gallon according to AAA.

The labor market has proven resilient so far this year, with an average of 92,000 jobs added each month over the first half of the year. However, a rate hike could risk slowing down hiring. Futures markets peg a roughly 62% chance of interest rates being left unchanged on Wednesday.