Fed Rate Hike Odds Soar as US Inflation Remains Elevated
Consumer prices in the US continued to rise in August, sparking speculation that the Federal Reserve may raise interest rates next week.
The Bureau of Labor Statistics reported a seasonally adjusted 0.4% monthly gain in the Consumer Price Index (CPI), which brought the annual rate to 3.4%. Core CPI, excluding volatile food and energy prices, rose 0.3%, outpacing forecasts by 0.1 percentage point.
Energy prices drove the increase, with gasoline costs jumping 3.9% and contributing over a third of the index's gain. Food prices were flat, but the annual rate accelerated to 2.7%. Shelter costs also rose 0.3%, while transportation services increased by 0.5%.
Markets responded by increasing bets on a Federal Open Market Committee interest rate hike, with odds now at about 90% according to CME Group's FedWatch tracker of fed funds futures prices.