Fed Rate Hike Expectations Rise Following US Inflation Data
Following critical US inflation data, investors are pricing in an increased probability that the US Federal Reserve will raise interest rates next week.
Investors anticipate that the probability of the US Federal Reserve (Fed) increasing short-term borrowing costs at its meeting next week has risen slightly following the release of critical data in the US.
Producer Prices and Unemployment Data
The latest data revealed that producer prices in the US increased by 5.4 percent annually in August. Weekly jobless claims, meanwhile, pointed to the continued stability of the labor market.
Fed Policy and Inflation Target
Consumer inflation data to be released on Friday is important for officials evaluating whether the policy rate is exerting sufficient downward pressure to bring inflation down to the 2 percent target. While inflation has remained above the target for 5.5 years, the bank keeps interest rates in the 3.50-3.75 percent range.
Analyst and Market Assessments
Capital Economics analysts believe that the Fed will proceed with an interest rate hike within this year due to the persistently high PPI data. According to CME Group data, the probability of an interest rate hike approached 70 percent following the data.