Fed Faces Tough Rate Decision as Inflation Remains Above Target
The Federal Reserve is set to convene for its September policy meeting amidst inflation concerns and a stronger-than-expected labour market. The August Consumer Price Index (CPI) report revealed that US consumer prices rose 0.4% in August, taking annual CPI inflation to 3.4%. Core CPI, which excludes volatile food and energy prices, rose 0.3% month-on-month, while the annual core inflation rate stood at 2.4%.
The Producer Price Index (PPI) for final demand also rose 0.4% in August, while prices were up 5.4% from a year earlier. The labour market has provided the Fed with less reason to worry about a sharp economic slowdown, with US employers adding 162,000 jobs in August, significantly above expectations.
The strong employment report and renewed energy-price pressures have increased focus on whether the Fed will deliver a 25-basis-point rate hike at its September meeting. The decision is due on Wednesday, September 17.