Fed Taps Brakes on Rate Hikes Despite Growing Inflation Concerns

Despite growing frustration over high inflation, the Federal Reserve is expected to keep interest rates unchanged at its upcoming meeting. The central bank's rate-setting committee may be eager to act soon, but a decision this week seems unlikely.

New Fed Chair Kevin Warsh has expressed 'no tolerance' for elevated inflation, which has remained above the 2% target for over five years. However, policymakers may want to see more economic data before making a move. The Commerce Department will release its first estimate of April-June growth and the personal consumption expenditures (PCE) price index for June on Thursday.

Only 29% of Wall Street traders predict a rate hike this week, but 76% expect one in September. A month ago, only 59% of traders expected a September increase, according to the CME FedWatch tool. Some analysts believe the Fed will 'release the kraken' with a shock rate hike.

However, other factors add to inflation pressure, including President Donald Trump's tariffs on foreign goods and investment in data centers driving up computer chip and electricity costs. The Iran war has also contributed to rising energy prices, which may continue to trend upwards if tensions escalate.