US CPI Surges to Highest Level in Four Months, Hike Odds Soar
US inflation has risen to its highest level in four months, sparking increased bets that the Federal Reserve will hike interest rates for the first time in over three years. The August consumer price index (CPI) rose 3.4% year-over-year, significantly above the Fed's 2% target.
The University of Michigan consumer sentiment index was near historic lows, and energy prices have been a major driver of inflation, with petrol prices up about 44% since Middle East tensions worsened in February.
President Donald Trump has weighed in on the situation, urging policymakers to keep rates low, claiming that a country as powerful as the US should not pay higher rates than others. However, White House National Economic Council director Kevin Hassett conceded that the president would not be 'very happy' if the Fed raises rates.
The CME FedWatch priced an about 87% chance of a 25-basis-point hike this week and two increases by year-end, after the funds rate has sat in a 3.50-3.75% range this year following 2024 cuts.