Rising Inflation and Oil Prices Shift Fed's Rate Hike Stakes
The Federal Reserve is set to meet next week amidst rising inflation and oil prices, which have complicated the decision on interest rates.
Data released on Friday showed that U.S. consumer price index rose by 3.4 percent year-on-year in August, with core inflation increasing by 0.3 percent month-on-month, accelerating from 0.2 percent the previous month.
This has led to a significant shift in market expectations, with the probability of a 25 basis point rate increase in September rising to nearly 90 percent, compared to about 70 percent the day before.
The decision will be a crucial test for Federal Reserve President Kevin Walsh, who attempted to convey a more hawkish message regarding inflation at his speech last month, asserting that the data do not show sufficient improvement in core price trends.