Fed Loses Patience with Inflation, Sees Rate Hike on Horizon

Despite concerns over high prices, Federal Reserve policymakers are not expected to raise interest rates at their meeting this week. The central bank's rate-setting committee will gather in Washington Tuesday and Wednesday, but members are likely to keep the benchmark interest rate unchanged for now.

New Fed Chair Kevin Warsh has expressed his 'no tolerance' for elevated inflation, which has been above the 2% target for over five years. However, policymakers may hold off on a rate hike this week due to concerns about disrupting financial markets that aren't expecting an increase yet.

Some analysts predict a rate hike in September, with 76% of Wall Street traders foreseeing a rise in interest rates by then. This is up from 59% just a month ago, according to the CME FedWatch tool. 'Policymakers' patience with high and persistent inflation is broadly exhausted,' wrote Joseph Egelhof and Guneet Dhingra at BNP Paribas Securities.

The uncertainty surrounding the Iran conflict has added to the challenge of taming inflation, which remains above target despite a cooling in core inflation. Fed policymakers will be monitoring economic data released on Thursday, including the first look at April-June economic growth and the personal consumption expenditures (PCE) price index for June.