US Inflation Data Increases Likelihood of Federal Reserve Rate Hike

The United States is likely facing an interest rate hike at next week's Federal Reserve meeting following a report that August inflation remained at 3.4 percent. This figure is significantly higher than the central bank's long term target of 2 percent. According to one report, the consumer price index rose 0.4 percent in August compared to 0.1 percent between June and July. Market expectations for a rate increase on September 15 and 16 jumped to over 85 percent, up from approximately 70 percent on Thursday.

Fed President Kevin Warsh faces pressure to act after stating at a Jackson Hole speech on August 28 that there was work to do if inflation remained elevated. Current interest rates are held between 3.50 percent and 3.75 percent, with the last increase occurring three years ago. Some analysts and economists from firms such as JPMorgan Chase and TD Bank have updated their forecasts to anticipate an increase. One report attributed the price levels to rising gasoline prices caused by the closure of the Strait of Hormuz and conflict in Iran, which pushed oil prices above 100 dollars per barrel.

Reports differ in how they frame the political tension surrounding this potential decision. Center lean outlets emphasize that the move goes against the explicit wishes of President Donald Trump, who prefers lower rates. A center left lean outlet frames the situation as a conflict between the reality of inflation and the anger of the president.