The Federal Reserve faces a hurdle in its effort to bring an end to its aggressive monetary policy in the face of high inflation. August’s Consumer Price Index report released on Wednesday showed that U.S. consumer prices rose on a monthly basis at the fastest rate in 14 months, showing that inflation continues to be resilient despite positive signs of cooling inflation.
Although economists believe that inflation and economic data continue to move in the Federal Reserve’s favor as it seeks to loosen its interest rate policy, this development is raising market bets that the central bank will need to raise interest rates at least once more before the end of the year, potentially in its September meeting.
Pantheon Chief Economist Ian Shepherdson explained that while fluctuating inflation data can be expected going forward, underlying consumer inflation is expected to fall to less than 3% by the end of the year. “We expect the Fed to remain on hold but to signal willingness to hike again depending on the data,” Shepherdson explained.