Fed Hike Expectations Soar Amid Strong US Inflation Data
US inflation data for August has strengthened expectations of a Federal Reserve interest rate hike. The latest Consumer Price Index (CPI) exceeded forecasts, leading to increased odds of a 25 basis point increase at the FOMC meeting on September 15-16.
Major banks such as HSBC, Goldman Sachs, and JPMorgan have adjusted their forecasts in response to the strong inflation data. According to HSBC US Economist Ryan Wang, 'Following the August employment report and CPI data that exceeded HSBC's expectations, we now expect the FOMC to vote for a 25 basis point rate hike at its September 15-16 meeting.'
The expected interest rate hike would raise the benchmark rate from 3.50-3.75% to 3.75-4.00%, marking the Fed's first increase since July 2023.
According to a Reuters survey of 101 economists, 86 predict a 25 basis point rate hike at the upcoming FOMC meeting, with over half expecting another hike by March 2027 due to persistent core PCE inflation and high energy prices.