Fed Keeps Rates Unchanged as Policymakers Eye Rate Hike in September

The Federal Reserve is set to keep interest rates unchanged at its upcoming meeting, despite growing frustration among policymakers over inflation. According to AP Economics Writer Paul Wiseman, the Fed's rate-setting committee may not be ready to take action this week, but members are losing patience with high prices that have been above the 2% target for more than five years.

New Fed Chair Kevin Warsh has expressed 'no tolerance' for elevated inflation, but policymakers may want to see more economic data before making a decision. The Commerce Department will release its first look at April-June economic growth and the personal consumption expenditures (PCE) price index on Thursday.

Only 29% of Wall Street traders predict that the Fed will raise rates this week, but 76% foresee a rate hike in September, according to the CME FedWatch tool. This suggests that policymakers' patience with high inflation is 'broadly exhausted', and there is a significant risk of a rate hike in September.

The uncertainty surrounding Iran's conflict with the US has added to inflation pressure, causing oil prices to surge and disrupting global energy supplies. Carl Weinberg, chief economist at High Frequency Economics, notes that it's possible for prices to reverse course, but 'should a central bank eschew wishful thinking and do its job of minimizing the probabilities that inflation will exceed target?'