Probability of FOMC Rate Hike Surpasses 70%

[Financial News] The probability of a rate hike has increased ahead of the Federal Open Market Committee (FOMC)'s decision on whether to change the U.S. policy rate on the 15th and 16th, as the United States released annual Consumer Price Index (CPI) inflation data on the 11th (local time).
Foreign media reported that, given the monthly increase in core consumer prices and other data released that day, the probability of a 0.25-percentage-point policy-rate hike on the 16th had exceeded 70%.
Just a week earlier, the probability of a Fed rate hike had stood at around 50%. It rose to 60% over the past two or three days as Middle East tensions surrounding the Strait of Hormuz intensified, driving a sharp increase in international oil prices.
The CPI inflation and other indicators released that day further strengthened expectations of a rate hike.
In particular, the monthly increase in core prices, a key inflation measure, came in at 0.3%, above the 0.2% forecast, fueling expectations of higher interest rates.
If the policy rate is raised at the Fed's meeting next week, it would be the first hike since July 2023, three years ago. The Fed kept its policy rate at 5.25% to 5.50% through July 2024 before beginning to cut it in September of that year. Since January this year, it has decided to maintain the current target range at 3.50% to 3.75% for five consecutive meetings.
The August CPI is the last key inflation indicator to be released ahead of the FOMC meeting scheduled for the 15th and 16th.
The U.S. Bureau of Labor Statistics said that annual U.S. CPI inflation was 3.4% in August, unchanged from July. Consumer prices rose 0.4% in August from the previous month, compared with a 0.1% increase in July.
U.S. CPI inflation surged to 4.2% in May amid the Iran war before falling to 3.5% in June and 3.4% in July.
[email protected] Lee Seok-woo, International Affairs Specialist Reporter