Fed Set to Raise Rates for First Time Since 2023

The Federal Reserve is expected to raise interest rates this week. Markets put the odds of a quarter-point hike at roughly 85%.

• Consumer prices rose 3.4% over the past year through August.
• Gasoline prices jumped 3.9% in August; wholesale diesel surged 24.1%.
• Core inflation, excluding food and energy, rose 2.4% — its lowest since early 2021.
• Oil climbed above $100 a barrel after Middle East conflict disrupted supply.

Why it matters: Rate hikes slow spending and investment. They cannot increase oil production.

• Hiring averaged only about 71,000 jobs per month over the past three months.
• The federal government is projected to spend more than $1 trillion on net interest this year.

How 33 sources split on this story

Where they split: The core dispute is whether the Fed should raise rates when inflation stems from a supply shock rather than overheated demand.

What’s next: Long-term Treasury yields and mortgage rates have already risen in anticipation of further hikes.

• As old federal debt is refinanced at higher rates, more tax revenue goes toward interest payments.
• Will higher energy prices feed into broader wage and price expectations, or remain a temporary supply shock?
• If the Fed holds, will bond markets interpret that as a loss of credibility on inflation?