Fed Hints at Another Rate Hike as Inflation Pressures Mount

The US Federal Reserve is likely to raise interest rates again due to mounting inflation pressures and a strengthening economy, according to Fed Governor Michael Barr. This move could happen as early as late October, just before critical national elections on November 3.

Business activity in the US has surged to its highest level since July 2021, with prices paid by businesses for inputs reaching a nearly four-year high. Oil prices have also risen, with Brent crude futures increasing by about 2% to $101.09 a barrel, and diesel fuel fetching over $6.50 a gallon on average.

The Fed's key rate was raised last week to the 3.75%-4.00% range, and 16 of 18 policymakers signaled that at least one more rate hike is needed before the end of this year. Barr stated that further policy adjustments are likely necessary to ensure inflation comes down to target in a timely fashion.

US Treasury yields jumped after the data release, with the benchmark 10-year yield rising back above 5% to its highest level since 2007. Short-term US interest-rate futures contracts were pricing about a 70% chance of another rate hike at the October 27-28 meeting.