Fed Rate Hike Looms: Trump Policies Stoke Inflation Fears

The Federal Reserve is widely expected to raise interest rates for the fourth time this century when it meets on October 28, and some of the blame can be laid at the feet of President Donald Trump's policies.

According to the CME Group's FedWatch Tool, which uses 30-day Fed Funds futures prices to track the probability of rate hikes/cuts, there is now a 57.6% chance that the federal funds target rate will be raised by another quarter point on October 28.

This surge in odds reflects a combination of factors, including Trump's tariffs and trade policies, which are contributing to persistently elevated inflation. The tariffs imposed on imports from over 80 countries have increased domestic manufacturing costs, which are then passed on to consumers.

Additionally, the ongoing tensions between the US and Iran have led to fuel price increases, as the Strait of Hormuz was shut down in February, halting the flow of a fifth of the world's crude oil supply.

Furthermore, the rapid growth of artificial intelligence (AI) infrastructure is also driving up inflation, with demand for AI hardware sending chip prices soaring and leading to higher consumer prices.