Fed Rate Vote Hinges on 0.01-Point Inflation Shifts as Markets Price 60% Hike Odds
Updated
Updated · CNBC · Sep 8
Fed Rate Vote Hinges on 0.01-Point Inflation Shifts as Markets Price 60% Hike Odds
3 articles · Updated · CNBC · Sep 8
Summary
A few hundredths of a percentage point in upcoming inflation data could decide whether the Federal Reserve hikes rates on Sept. 16 or holds.
August PPI on Thursday and CPI on Friday will be used to infer core PCE — the Fed's preferred gauge — with strategists saying 0.21%-0.22% would favor a hold and 0.23%-0.24% could tip toward a hike.
Markets are leaning hawkish but not decisively, pricing about a 60% chance of a quarter-point increase after Chair Kevin Warsh's Jackson Hole remarks stressing the Fed's failure to hit its 2% inflation target.
That leaves Warsh under pressure to persuade a divided committee, with hawks including Beth Hammack and Loretta Mester backing a hike while Christopher Waller, Michael Barr and John Williams favor a data-dependent approach.
The decision is further complicated by expected revisions that may trim past PCE readings and by President Donald Trump's threat to punish trade-surplus countries if the Fed does not cut rates.