The Federal Reserve is likely to increase interest rates in September following a hotter-than-expected inflation report.
The Federal Reserve is expected to raise interest rates in September, marking the first hike since 2023. This shift follows an August Consumer Price Index report showing an annual inflation rate of 3.4%, which exceeded economist forecasts of 3.3%.
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Gasoline prices, which rose 27.4% from a year ago, accounted for one-third of the monthly increase. Core prices, which exclude food and gas, rose 0.3% from July, indicating that inflationary pressures are broadening beyond energy. This data suggests the Federal Reserve will likely increase borrowing costs for consumers, such as mortgages and auto loans, while providing higher returns for savers. Several economists and Fed officials, including Fed governor Christopher Waller, have signaled a willingness to hike rates if inflation does not show significant progress toward the 2% target. The Fed is scheduled to announce its decision at 2 p.m. ET on Wednesday, Sept. 16. The decision comes as the central bank navigates price pressures from the Iran war and the Russia-Ukraine war, both of which have impact on global oil and diesel prices.