Rate Hikes Loom: Fed and RBA Expected to Raise Interest Rates

The US Federal Reserve and Australia's RBA are expected to raise interest rates in the coming weeks. The Fed will make its decision on Wednesday, and markets are pricing an 85% chance of a rate hike after firm inflation data was released last week.

The August inflation report showed headline prices rising 3.4% over the year, unchanged from July, with core inflation still above the Fed's 2% target. This has given Chair Kevin Warsh the cover to act and raise rates, as he has repeatedly signaled little tolerance for inflation running above target.

The RBA is also expected to hike interest rates at its September meeting, with markets pricing a 72% chance of a rate rise. The Bank's decision will come after underlying inflation stayed higher than expected in the July figures and economic growth beat forecasts in the June quarter.