Fed Hikes Now a Certainty: Stalled Inflation Measure Sets Stage

Investors have been bracing for a potential rate hike from the Federal Reserve, and according to one economist, it's no longer a question of if but when. The Realtor.com economist notes that the market flipped from expecting cuts to anticipating hikes over just a few weeks. But what's behind this sudden shift in expectations?

The key is understanding the difference between two inflation measures: CPI and PCE. While CPI cooled off, PCE, which is the gauge the Federal Reserve targets at 2%, stalled around 3.7% (core near 3.3%) for months, well above target.

This stall, not a spike in inflation, is what killed the cut narrative and put new Fed Chair Kevin Warsh on high alert. His tough talk at Jackson Hole was about credibility and a genuine inflation stall rather than a fresh emergency. One wildcard that could force an actual hike is oil prices.