Fed on Edge as Inflation Report Looms Amid Ominous Oil Price Spike
The upcoming inflation report is expected to be one of the most consequential in years, coming at a time when oil and gas prices are spiking due to renewed combat in the Middle East. The Federal Reserve is considering whether to lift its short-term interest rate next week, with some officials suggesting that Friday's report could tip the balance either way.
The Trump administration is attempting to counter voter concerns about high prices and rising interest rates ahead of the midterm elections. President Donald Trump has promised $5,000 payments to every American adult if the GOP keeps a majority in Congress, but this move would require congressional approval and could stoke inflation further. Meanwhile, Treasury Secretary Scott Bessent has increased buybacks of Treasury bonds in an effort to keep longer-term interest rates lower.
The government is expected to report that headline inflation ticked down last month to 3.3% from 3.4%, but this still exceeds the Fed's 2% target. Core prices are projected to have risen by just 0.2% from July to August, and 2.4% last month from a year earlier.