Fed Set to Hike Rates Amid Crude Oil Price Spike

The US Federal Reserve is poised to raise interest rates for the first time in over three years at its two-day policy meeting on Wednesday, September 16. According to economists and market analysts, a quarter-point increase to a range of between 3.75% and 4% is expected.

Fed chairman Kevin Warsh has been under pressure from US President Donald Trump to lower rates, but many are expecting the opposite. Warsh's predecessor, Jerome Powell, was known for his hawkish stance on interest rates, and it appears that Warsh shares similar views on inflation levels.

The recent flare-up in tensions between the US and Iran has contributed to a spike in crude oil prices, which is expected to have an impact on inflation. The latest producer price index report showed a significant increase in wholesale inflation, driven by rising diesel and other commodity prices.

HSBC economists predict that there will likely be two more rate hikes before the current cycle is over, unless inflation rises further than anticipated. They anticipate a pause ahead of the mid-term elections in November and another rate hike in December.