Fed Pauses on Rate Hike Despite Growing Frustration Over Inflation

Despite growing frustration over high prices, Federal Reserve policymakers may not raise interest rates this week. However, they are likely to reconsider their stance at their next meeting in September.

The Fed is expected to keep its benchmark interest rate unchanged when it meets on Tuesday and Wednesday. Although Fed Chair Kevin Warsh has expressed 'no tolerance' for elevated inflation, his central bank may hold off on a rate hike until then.

Fed watchers Joseph Egelhof and Guneet Dhingra at BNP Paribas Securities suggest that the Fed could 'release the kraken' with a 'shock rate hike', but this is seen as unlikely. Instead, policymakers may wait for more economic data to be released on Thursday.

The Commerce Department will publish the first look at April-June economic growth and the personal consumption expenditures (PCE) price index for June. Only 29% of Wall Street traders predict a rate hike this week, but 76% foresee one in September.