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Expectation of Fed Increase Rates despite Strong Inflation Reports

Due to the reports of inflation that rose up last month, most economists and investors still think that the Federal Reserve aill hold on in hiking interest rates. Fed increase rates is in tough position

Fed Increase rates

With the report of inflation, the Fed has increased rates for more than a year. In order to survive the inflation it should have to keep rates high but it doesn’t want to overtighten and knock the economy into recession.

In August the price data index showed that there was an overall annual inflation rise up to a 3.7% rate of the year ending in August. The line was expected but the Fed doesn’t want to see the inflation moving. The expectation of Fed Increases rates is slowly taking place.

However, on the wholesale side, the inflation goes up to 1.6% for the year ending August which most economists did not expect. It is much higher than the 1.2% which they are expecting. The less-known PPI Gauges of the wholesale prices of goods are eventually passed down to the consumers.

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Can be the Fed Increase rates?

Investors have dug in their heels and believe that the possibility of a delay is almost a foregone conclusion despite the one-two punch of both stories arriving quickly. Two inflation readings just days before the meeting are unlikely to have an impact on the Fed’s decision-making because it works slowly and likes to foreshadow its decisions.

In a report published by the Washington Examiner, the likelihood of the pause by the Fed was also captured by the CME Group’s FedWatch tool, which calculates the expectation of Fed Increase rates of prices in the short-term market.

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Investors peg 97% odds on the Fed Increase rates that will hold a target of 5.2% to 5.50% after their meeting on Tuesday and Wednesday of next week. There is a mere 3% chance that Fed chairman Jerome Powell and another bank official will shock an economy hike again.

The predictions get a little less certain for the Fed’s November meeting, which allows it more than a month to digest a slew of data, including labor and inflation reports from September. It will also keep August’s CPI and PPI reports in mind when considering how inflation is trending come November.

According to a report by The Gazette, More than 31% of Investors predicted that the Fed increase rates after its meeting on November 1. Looking further down the road, 41% think that the Fed increase rates will be higher as they enter 2024 compared to right now.

Powell’s statement of Fed increase rates

Powell is very careful in his statement about the Fed’s monetary policy agenda. He is very careful on the issue with regard to how high the rates will increase and he is careful on the spook of markets.

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