Fed Faces Inflation Test as Interest Rate Decision Looms
The Federal Reserve is set to make its next interest rate decision on Wednesday as inflation continues to rise. The current inflation rate stands at 3.5%, which is higher than the Fed's desired level of 2%. Fed Chair Kevin Warsh has vowed to slash inflation, saying 'Persistently high prices are a burden for the American people.'
The recent Iran war and its aftermath have driven up energy prices, catapulting inflation to a three-year high. A preliminary peace agreement in June offered some relief, but renewed fighting has rekindled crude prices. Oil prices have proven volatile in recent weeks, with a brief drop below $100 a barrel last month.
Despite the potential for a rate hike to cool off prices, the Fed is expected to hold interest rates steady for now. Futures markets peg a 62% chance of interest rates being left unchanged on Wednesday, according to the CME Group's FedWatch Tool. However, odds favor a rate hike in September.