Former New York Fed President Bill Dudley commented on the latest inflation data, expressing his expectation that the Federal Reserve will raise interest rates by 25 basis points. This anticipation comes after the US core Consumer Price Index (CPI), which excludes volatile food and energy costs, rose by 0.3% in August from the previous month. This figure exceeded the median estimate of a 0.2% increase in a Bloomberg survey, bolstering the case for a rate hike.
The annual core CPI advanced by 2.4%, indicating that inflation remains a concern for policymakers. A significant contributor to this unexpected rise in core inflation was a record jump in the price of cellular phone services, which played a key role in tipping the measure above forecasts.
Following the release of the inflation data, bond traders have adjusted their expectations, pricing in a near-certain 90% chance of a rate hike next week. Furthermore, they are fully pricing in two rate increases before the end of the year, reflecting the market's strong conviction in the Fed's response to persistent inflationary pressures.
