Rate Hike on the Horizon: US Fed to Raise Rates for First Time Since 2023

Central banks around the world will be making key decisions this week, with the US Federal Reserve taking center stage. The Fed is expected to raise its policy rate by 0.25 percentage points to a range of 3.75% to 4.00%, according to Commonwealth Bank economists.

This decision comes as stronger-than-expected underlying inflation has added to expectations of another rate rise. US core inflation rose 0.3% in August, prompting markets to price an 85% chance of a 0.25 percentage point increase this week.

The UK's Bank of England is also due to meet this week, but CommBank expects it to leave its policy rate unchanged at 3.75%. In contrast, Japan is expected to raise its policy rate by 0.25 percentage points to 1.25%.