Feds Set to Hike Rates as Inflation Holds Steady at 3.4%

The Federal Reserve is expected to hike interest rates next week as inflation remains high at 3.4% annually, according to the latest Consumer Price Index (CPI) data released by the Labor Department on Friday.

Investors have been increasingly eyeing a rate increase, and the probability of a September rate hike surged above 90% following the CPI report, according to CME FedWatch. The report showed prices rose 3.4% annually in August, unchanged from the prior month, but jumped 0.4% from June.

The new CPI report is the final major economic indicator before the Federal Open Market Committee (FOMC) holds its two-day policy meeting next week, with a vote on interest rates to be held on Wednesday. An increase in the benchmark interest rate would mark the first rate hike in three years and have broad implications for the housing market.

While prediction marketplace Kalshi estimates a 75% chance that the FOMC will increase the federal funds rate from its current range, Realtor.com senior economist Jake Krimmel points out that the CPI report 'may prove a bit of a Rorschach test' for the FOMC, likely doing little to alter entrenched views within the central bank.