Inflation Data Boosts Odds for Fed Rate Hike in September

The Federal Reserve's interest rate hike prospects have gained some momentum after the release of July inflation data. The personal consumption expenditures price index, which is the Fed's target, rose to 3.7% from 3.6% in the previous month.

Core PCE inflation, a measure that strips out volatile food and energy prices, was steady at 3.3%, unchanged from June. This data does not contradict earlier reports of slowing consumer price inflation over the past couple of months.

Fed Chairman Kevin Warsh has vowed to end above-target inflation but has not indicated whether he believes it will recede without interest rate hikes.

Heather Long, chief economist at Navy Federal Credit Union, noted that 'The United States still has an inflation problem.' She stated that the data gives Warsh time to wait and see, but he needs to be clearer about what he's watching closely and what it would take for him to hike rates.

Fed funds futures prices now reflect a 44% probability of a September Fed rate hike, up from 36% before the release of the data.