Fed Set to Raise Rates to Combat Inflation

The US Federal Reserve is set to make a crucial decision on interest rates this week as it tackles persistently high inflation. The Fed has been holding rates steady since January, but with several policymakers hinting at a rate hike if inflation doesn't slow down.

New data showed consumer inflation remaining steady at 3.4% in August, well above the central bank's long-term target of 2%. Market expectations of a 25-basis-point rate hike have surged to over 85%, according to CME's FedWatch tool.

The decision is seen as a test for Kevin Warsh, the Trump-appointed Fed chair. Analysts say that if he raises rates to combat inflation, it will establish his credibility as an independent central banker.

However, raising interest rates would increase borrowing costs and act as a brake on further investment and consumption activity, which could have far-reaching consequences for the US economy.