Hotter-than-expected inflation data released this week could force Federal Reserve policymakers to take historic action and approve a 100-basis-point interest rate hike.
Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee meeting in Washington, D.C., on May 4, 2022.
Even more concerning is that so-called core prices, which strip out the more volatile measurements of food and energy, re-accelerated last month: Core prices climbed 6.3% from the previous year, above the 6.1% forecast from economists, and climbed 0.6% on a monthly basis – a bigger increase than in April, May, June and July, and a troubling sign that underlyingWall Street is now penciling in a 28% chance of a super-sized rate hike at the Fed's Sept.
But that was before the August inflation report, which experts agree was resoundingly bad, underscoring just how strong inflationary pressures in the economy still are. Bond yields spiked higher and stocks tumbled after theA shopper looks at organic produce at a supermarket in Montebello, California, on August 23, 2022.
"While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses," he said last month while speaking in Jackson Hole, Wyoming. "These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain."
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