Fed rate hike likelihood jumps to nearly 90% after hotter CPI report
Summary
The Consumer Price Index (CPI) rose more than expected in August, increasing the chance that the Federal Reserve will raise interest rates in September. Rising energy prices, especially gasoline, are pushing inflation up, which may lead the Fed to increase borrowing costs to try to control inflation.Key Facts
- August’s inflation rate was 3.4% annually, slightly higher than the 3.3% forecasted.
- Gasoline prices rose 27.4% over the past year, causing one-third of the monthly inflation increase.
- Core prices, which exclude gas and food, increased 0.3% in August, showing inflation is spreading beyond energy.
- The chance of a rate hike at the Fed meeting on September 16 rose to nearly 90%.
- The Fed is expected to raise interest rates by 0.25 percentage points to a target range of 3.75% to 4%.
- Higher interest rates will make loans like mortgages and credit cards more expensive but may benefit savers with better returns.
- Rising oil prices, above $100 a barrel, and diesel costs over $6 a gallon are adding pressure to inflation.
- Conflicts in the Middle East and the Russia-Ukraine war are affecting oil supply and prices, contributing to inflation.
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