Fed Poised to Hike Rates in September Despite Cooler Inflation

The Federal Reserve is likely to raise interest rates in September despite a slightly cooler Consumer Price Index (CPI) report. The CPI rose 3.4% over the past 12 months, with the core measure up 2.5%. This is not the measure targeted by the Fed, but it provides insight into inflationary trends.

According to futures markets, there's a 40% chance of a rate hike next month, with no change having a 60% probability. The Fed has been considering tightening policy for some time, and this meeting is seen as an opportunity to make a move.

The CPI report can be volatile from month to month, and the Bureau of Labor Statistics uses sampling methods that may not accurately capture every sale or price change. However, the Fed focuses on underlying inflationary pressures rather than short-term fluctuations caused by factors like tariffs or changes in food and energy prices.