86% Chance of an FOMC Rate Hike

[Financial News] With the Federal Open Market Committee (FOMC) set to decide whether to change the U.S. benchmark interest rate on the 15th and 16th, the release of U.S. consumer price inflation data on the 11th (local time) further increased the likelihood of a rate hike.
Foreign media reported that, based on the monthly increases in core consumer prices and other data released that day, the probability of a 0.25-percentage-point rate hike on the 16th had exceeded 86%.
The forecast for a Fed rate hike, which had stood at around 50% just a week earlier, rose to 60% over the past two or three days as tensions escalated in the Middle East over the Strait of Hormuz, sending international oil prices sharply higher.
The CPI inflation and other indicators released that day further strengthened expectations for 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 benchmark interest 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 benchmark rate at 5.25% to 5.50% through July 2024 before beginning to cut it in September of that year. The current target range has remained at 3.50% to 3.75% following five consecutive decisions to maintain it since January this year.
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. Department of Labor’s Bureau of Labor Statistics said that U.S. CPI inflation was 3.4% year over year in August, unchanged from July. Consumer prices rose 0.4% from the previous month in August, compared with a 0.1% increase in July.
U.S. CPI inflation rose to 4.2% in May amid the Iran war before falling to 3.5% in June and 3.4% in July.
[email protected] International Affairs Specialist Lee Seok-woo Reporter