Fed Hints at Another Rate Hike... Inflation Will Decide

Federal Reserve Chairman Michael Barr indicated the bank's readiness to take decisive action and raise interest rates if upcoming data does not show a clear slowdown in inflation.

The probability of a rate hike at the September meeting has risen to 70.2%, compared to 29.8% for rates to remain unchanged.

Inflation remains well above the Fed's 2% target, with the annual personal consumption expenditures (PCE) price index at 3.7% and core inflation at 3.3%.

Barr believes the decision will depend primarily on upcoming inflation and employment data. If inflation remains high, a rate hike may be necessary, but if it slows significantly, the Fed may prefer to wait.

Barr warned of continued price pressures in the services sector, along with the impact of tariffs, the conflict in the Middle East, and spending related to artificial intelligence.

These statements come amid a more hawkish tone from Fed officials, increasing market anticipation for the September meeting and bolstering the likelihood of a tightening of monetary policy.