Fed Weighs Timing of Next Rate Hike Amid Persistent Inflation

The Federal Reserve is facing a shift in its debate over interest rates as stubborn inflation and consistent economic growth raise chances of another rate hike later this year.

Inflation remained elevated at 3.4% in August, above the Fed's target of 2%, while consumer spending jumped 0.9% in the same month, showing consumers are finding room in their budgets for discretionary spending.

The economy grew at a healthy 2.2% pace in the second quarter, despite an energy shock and rising borrowing costs. The rapid buildout of artificial intelligence has been driving business investment, which rose 9% in the second quarter, excluding housing.

Economists and investors are widely anticipating another interest rate increase before the end of the year, possibly as soon as next month, to combat inflation.