Fed Faces Pressure to Hike Rates Amid Stubborn Inflation

Investors are bracing for a potential rate hike at next week's Federal Reserve meeting after August inflation data showed price pressures remaining stubbornly high.

The Consumer Price Index rose 0.4% in August from July and 3.4% over the past year, both in line with expectations.

However, core CPI, which strips out volatile food and energy prices, increased 0.3% during the month, faster than the 0.2% increase economists had expected.

This acceleration in underlying inflation has strengthened the case for policymakers who argue that the Fed should raise interest rates rather than wait for inflation to cool further.

Traders now see a roughly 85-90% probability of a quarter-percentage-point rate increase at next week's meeting, according to the CME Group's FedWatch gauge.