Fed Signals Interest Rate Hikes Ahead Amid Rising Inflation Concerns

Fed officials are increasingly hinting at raising interest rates to combat high inflation. US Federal Reserve Governor Michael Barr stated that if price pressure doesn't cool down enough, he believes the Fed should 'act decisively to raise interest rates'. This statement doesn't necessarily mean a rate hike is imminent, but it suggests a growing likelihood of one.

Barr made these comments at a forum in Washington, where he assessed the US labor market as stable and the economy still growing steadily. However, inflation has remained high for over 5 years, and Barr noted that if data shows inflation falling towards the 2% target, the Fed may spend more time assessing policy.

Just days ago, Fed Chairman Kevin Warsh emphasized the importance of core inflation returning to its target pace at an appropriate speed. This sparked a strong increase in market expectations for an interest rate hike, with the probability rising from around 35% to 60% after his speech at Jackson Hole.

The next FOMC meeting is scheduled for September 15-16, and investors will be closely watching upcoming jobs data, including the ADP private sector jobs report, unemployment claims, and especially the August jobs report. These figures may further influence expectations about interest rates and gold prices.