Fed Likely to Stay Put Despite Rising Hike Bets

The U.S. Federal Reserve (Fed) is likely to keep interest rates unchanged this week despite rising hike bets, according to economists and experts. The probability of a rate hike has been growing due to renewed energy price increases and hawkish intonations from Fed policymakers. However, James Bullard, former head of the St. Louis Fed, believes that the Fed may not be ready to commit to a sequence of rate increases just yet.

At the June meeting, all 18 Fed policymakers supported leaving the target for short-term borrowing costs unchanged, despite some who saw the case for a rate hike. Since then, inflation data has softened, with consumer prices rising 3.5% in June from a year earlier, down from 4.2% in May.

Warsh, the new Fed chief, has expressed concerns about containing inflation and believes productivity growth may allow for faster economic expansion without stronger price pressures. However, half of the Fed policymakers at the June meeting still pencil in a higher policy rate by the end of this year due to persistent inflation above the Fed's 2% goal.