Fed Hike Appears Imminent Amid Rising Inflation and Energy Prices
The Federal Reserve is widely expected to increase US interest rates this week in response to rising inflation. The US' overall consumer price index (CPI) inflation rate was 3.4% for the 12 months to August, unchanged from the previous month's reading.
Energy prices were the driving force behind the latest US CPI number, accounting for more than one-third of the rise. The oil price jumped when the US attacked Iran at the end of February and has risen again recently as tensions between the two countries worsened and Iran continues to keep the Strait of Hormuz closed.
Core CPI inflation, which strips out volatile food and energy prices, was up 0.3% in the month, 0.1 percentage points higher than expected.
Many investors expect a hike from the Fed, including Christian Galipeau, head market strategist at the Franklin Templeton Institute: 'The futures market has the 2026 terminal fed funds rate at 4.09%, the market believes a hike is coming.'