Fed Interest Rate Hike Hinges on August Inflation Data

The Federal Reserve's decision to raise interest rates may be dependent on upcoming inflation data. Economists and investors expect the Fed to increase rates by a quarter of a percentage point at its September meeting, but recent employment numbers have lowered expectations.

Friday's job report showed that the U.S. economy added 162,000 jobs in August, exceeding forecasts. The labor-force participation rate also edged up to 61.6%. Jason Pride, chief of investment strategy and research at Glenmede, stated, 'A labor market adding workers at this pace, with layoffs contained and participation recovering, gives the committee no reason to unfix its focus from the price stability side of its mandate.'

At least three Fed officials have signaled that August's inflation data will be a deciding factor in their policy decisions. Governor Christopher Waller said, 'My decision on the appropriate stance of policy will be heavily influenced by what we learn about August inflation.' If prices come in hot, he would consider a rate hike.

Economists surveyed by FactSet expect the producer price index to show a 0.4% increase in August, while the consumer price index is expected to rise 0.4%. The core PCE price index will be closely watched, as it's the Fed's preferred inflation benchmark.