Inflation Remains Above Target as Federal Reserve Prepares to Announce Interest Rate Move This Week Here
Inflation remains above target
Energy costs helped push overall U.S. inflation to a 3.7% annual rate in September. Core inflation, which leaves out volatile energy and gas categories, was up 2.6% from a year earlier.
The Federal Reserve aims for annual inflation of 2%. Thomas Ryan, an economist at Capital Economics, said recent inflation readings and expectations could concern officials, while they still appear set on tightening policy gradually.
A decision due Wednesday
In September, the central bank increased its federal funds rate by a quarter of a percentage point. That was its first rate increase in three years and raised borrowing costs across the U.S. economy.
Markets look toward December
Most economists and investors expect another rate increase before the end of the year, likely at the Fed’s final meeting, scheduled for Dec. 8-9. No meeting is planned for November.
CME Group’s Fed Watch tool, based on 30-day Fed funds futures prices, showed an 88% chance traders expected rates to remain unchanged in October and a 71% chance of a December increase. After the September hike, New York Fed President John Williams said officials had time to gather more information and did not need to act urgently.
Key points
- The Fed is due to announce its interest rate decision Wednesday at 2 p.m. ET.
- September inflation was 3.7% overall and 2.6% for core prices, compared with the Fed’s 2% target.
- Most economists and investors expect another rate increase before year-end, likely in December.
- CME Group’s tool showed an 88% chance of no October change and a 71% chance of a December increase.