Fed Hike Fears Mount as Oil Prices Soar and Inflation Remains High

Oil prices and US inflation figures have sparked concerns that the Federal Reserve will raise interest rates soon, despite potential negative effects on economic growth. The latest data showed that consumer inflation in the US remained steady at 3.4 percent in August, meeting analyst expectations but still above the Fed's target of two percent.

Investors are resigned to a rate hike next week, according to Jack Ablin from Cresset Capital Management, who noted that the inflation figures were 'as expected'. Yields on long-term US Treasury bonds remained high, while major Wall Street indices experienced gains after four consecutive negative sessions.

The situation has put Fed Chairman Kevin Warsh at odds with President Donald Trump, who has demanded lower interest rates to boost economic activity. With a resilient labor market and firming core inflation, the Fed will face pressure to avoid a rate hike next week. Markets are pricing in a 90 percent probability of a rate increase, giving policymakers room to act without catching investors off guard.