82% Probability of a Fed Rate Hike by Mid-September
The likelihood of a Federal Reserve rate hike at its September meeting has increased to 82.4%, according to the CME Group's FedWatch Tool, up from 52.4% in early July. This shift is attributed to three key factors: renewed energy supply concerns due to escalating U.S.-Iran tensions, persistent inflationary pressures linked to Trump-era policies (referred to as 'Trumpflation'), and rising costs driven by artificial intelligence infrastructure demand. The recent escalation between the U.S. and Iran has led to a resurgence in crude oil prices after earlier peace talks had temporarily eased energy costs. Meanwhile, core PCE inflation remains elevated despite headline figures declining slightly, indicating broader economic inflationary pressures that are not easily reversed. Additionally, AI-driven surges in GPU demand have contributed to higher consumer costs. A potential rate hike could impact the momentum of major U.S. stock indices like the Dow Jones Industrial Average and Nasdaq Composite, which had reached record highs earlier this year.
Tickers: $NVDA
Topics: energy supply shock Federal Reserve inflation interest rates