US Fed "Decisively Raise Rates if Inflation Not Controlled"...Interest Rate Hike Probability 71%

▲ Dollar (USD), US Federal Reserve (Fed), Interest Rate Hike/AI Generated Image

Within the US Federal Reserve (Fed), the argument for an interest rate hike in September is gaining momentum again.

According to cryptocurrency media outlet Coingape on September 1 (local time), Fed Governor Michael Barr stated that interest rates must be decisively raised if inflation does not slow down sufficiently. Conversely, he explained that if inflation moves towards the Fed's target of 2%, more time could be spent on policy judgment.

Barr assessed that inflation has significantly decreased from its peak of over 7% in 2024. However, he diagnosed that the trend of price stability has halted due to tariffs and the impact of the US-Iran conflict. He also cited the rapid expansion of artificial intelligence (AI) investment as a new inflationary factor.

Within the Fed, statements leaving open the possibility of interest rate hikes are continuously emerging. Fed Chairman Kevin Warsh warned in his Jackson Hole speech that there were no signs of inflation slowing down. He also stated that he would take necessary measures to bring inflation down to the target level. Federal Reserve President Beth Hammack also supported interest rate hikes and cast a dissenting vote in favor of a hike at the July Federal Open Market Committee (FOMC) meeting.

Prediction markets are also quickly reflecting the possibility of tightening. On Polymarket, the probability of the Fed raising interest rates this year has risen to 71%. The likelihood of a 25bp hike at the September FOMC was tallied at 57%. The re-escalation of the conflict between the United States and Iran, pushing international oil prices above $90 per barrel, is also fueling inflation concerns.

Ahead of the September meeting, the Consumer Price Index (CPI) and Producer Price Index (PPI) are considered key data for interest rate decisions. The employment report to be released this week is also drawing attention. If the job market maintains a strong trend, it could provide additional grounds to support an interest rate hike.

[Article Key Summary]

-Fed Governor Michael Barr stated that interest rates must be decisively raised if inflation does not slow down sufficiently.

-On Polymarket, the probability of an interest rate hike this year rose to 71%, and the possibility of a 25bp hike in September rose to 57%.

-Amid tariffs, the US-Iran conflict, and expanding AI investment being identified as price variables, CPI, PPI, and the employment report have emerged as key indicators for the September FOMC.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*