US Core Inflation Surges, Fueling Hike Expectations Ahead of Fed Meeting

US core inflation rose 0.3% in August, surpassing expectations and putting pressure on the Federal Reserve to raise interest rates at its next policy meeting.

The annual inflation rate is now 3.4%, in line with forecasts, but economists say this hotter-than-expected data strengthens the case for a rate hike, especially alongside rising oil prices.

Investors have increased their bets on an interest rate hike, with Reuters reporting that traders are pricing in an 85% chance of a 25-basis-point hike next week, up from 70% before the CPI release.

However, some warn that a hike could infuriate President Trump, who has repeatedly demanded lower rates and previously attempted to fire Fed officials. Bloomberg Economics' Anna Wong said 'Investors want and expect the FOMC to hike. If the Fed does not hike, Warsh will lose credibility.'