Overview
- Markets and analysts expect the Federal Reserve to keep its policy rate at the September 3.75–4.00% range at next week’s FOMC meeting while remaining data dependent.
- Investors still price at least one more rate increase before year-end, with a December move seen as the likeliest timing for further tightening.
- Inflation has reaccelerated from its 2024 lows and the Fed’s preferred PCE gauge rose to about 3.9% in May after peaking near 7.2% in 2022, keeping inflation clearly above the 2% target.
- Higher global energy costs linked to disruptions in Gulf oil and gas flows following strikes on Iran have pushed up fuel prices and are feeding into broader consumer prices.
- The Fed faces heightened political scrutiny from the White House even as officials such as Loretta Mester say decisions will be based on economic data; households are likely to see continued pressure from prices rising faster than wages and high borrowing costs.