Inflation Refuses to Budge: Pressure Mounts for Rate Hike

US inflation remains stubbornly high, prompting pressure on Fed Chair Kevin Warsh to hike interest rates. The latest consumer price index (CPI) data shows core inflation rose 0.3% last month, exceeding the expected 0.2%, and 2.4% year-over-year, while overall CPI measured 3.4%. These figures, combined with a stronger-than-expected August producer price index and soaring oil prices above $100 a barrel, suggest that inflation is moving in the wrong direction.

Warsh has stated that if underlying inflation doesn't move toward the Fed's target of 2% 'clearly and at sufficient speed', policymakers may need to act. Economists now say the August data does not meet this bar. Principal Asset Management chief global strategist Seema Shah believes a rate hike next week is almost guaranteed, while Inflation Insights founder Omair Sharif says it's time for the Fed to 'put up or shut up'.

However, not all economists agree. Oxford Economics analysts estimate core PCE for August likely rose 0.2%, which would allow the Fed to skip a rate hike next week. But this is on a 'knife's edge', and several other economists forecast a higher core PCE reading, which could lead to concern among Warsh's colleagues.