Fed Faces Quarter-Point Rate Hike Pressure Amid Inflation Rise

The Federal Reserve is facing increasing pressure to raise interest rates in response to rising inflation. The August consumer price index rose 0.4%, with a year-over-year increase of 3.4%, driven by surging fuel prices.

Gasoline increased 3.9% in August, while the category including automotive diesel jumped 10.1%. Core CPI, which strips out food and energy, rose 0.3% in August and was up 2.4% year over year.

Economists warn that a monthly core rise of 0.3% would likely lead to a quarter-point interest-rate hike next week. Fed-funds futures traders now price in an 86% probability of a rate hike on September 16, up from 72% on Thursday and less than 50% a month ago.

The bond market is also putting pressure on the Fed, with the 30-year U.S. Treasury yield hitting its highest since 2007 despite efforts by Treasury Secretary Scott Bessent to stem the runup in yields through buybacks.