Fed Hike Uncertainty: Markets Wait for August CPI Data and Trump Administration Pressure

The US Federal Reserve's next move is uncertain as the September 15-16 FOMC meeting draws near. Fed funds futures indicate a 55-60% likelihood of a quarter-point hike, up from approximately 33% a few weeks prior. The market is waiting for the August US CPI data, due this Friday.

Two factors point to a potential showdown: officials from the Trump administration are pushing back against a rate hike, and the upcoming US CPI data will be crucial in the Fed's decision-making process.

The Fed's priority is controlling inflation, as signaled by Kevin Warsh at the Jackson Hole symposium. The annual inflation rate in the US slowed for a second consecutive month to 3.4% in July 2026, from 3.5% in June. However, the persistence of inflation in August remains uncertain due to rising oil prices.

The strong jobs data has also increased pressure on the FOMC to consider a rate hike. President Trump and Treasury Secretary Scott Bessent are urging the Fed to stop or reverse rate hikes, citing the potential for negative effects on the economy during a supply shock.