Many of the data points within the inflation report were worse than economists expected, including some the Fed pays particular attention to, such as inflation outside of food and energy pri
Markets honed in on a 0.6% rise in such prices during August from July, double what economists expected, said Gargi Chaudhuri, head of investment strategy at iShares.
The inflation figures were so much worse than expected that traders now see a one-in-three chance for a rate hike of a full percentage point by the Fed next week. That would be quadruple the usual move, and no one in the futures market was predicting such a hike a day earlier. The Fed has already raised its benchmark interest rate four times this year, with the last two increases by three-quarters of a percentage point. The federal funds rate is currently in a range of 2.25% to 2.50%.
"The Fed can’t let inflation persist. You have to do whatever is necessary to stop prices from going up," said Russell Evans, managing principal at Avitas Wealth Management. "This indicates the Fed still has a lot of work to do to bring inflation down."
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