Federal Reserve rate decision eyed as August inflation hits 3.7%

On Wednesday, the markets demonstrated optimism following the release of moderate August consumer price inflation data. The figures unveiled a 0.6% monthly increase, in line with expert forecasts, while the yearly rate rose to 3.7%, slightly above expectations. This has led to anticipation that the Federal Reserve may maintain the current interest rates in their upcoming September meeting.

The inflation data was notably influenced by a surge in gasoline prices, which peaked at $3.984 per gallon in the third week of August, up from $3.676 in July. Despite this increase, energy prices are expected to remain range-bound in the near future. Core CPI, excluding volatile elements such as food and energy, saw a modest rise of 0.3%, a figure closely watched by Federal Reserve officials for assessing long-term inflation trajectory.

Wall Street consensus suggests a likely pause in rate hikes during the imminent Federal Reserve session, with the CME FedWatch Tool estimating a 97% chance of rates remaining unchanged. Economist Vincent Reinhart of Dreyfus and Mellon suggested that any action from the Federal Reserve would likely occur in November.

In stock market news, megacap growth equities presented varied results on Wednesday. Tesla (NASDAQ:) and Meta Platforms (NASDAQ:) experienced increases of 1.9% and 1.2% respectively, while tech giants Apple (NASDAQ:) and Alphabet (NASDAQ:) saw minor declines. Market participants are now awaiting data on August’s producer prices and retail sales due for release ahead of the Federal Reserve’s policy decision on September 20.

The overall market sentiment is currently bullish, primarily driven by expectations regarding the Federal Reserve’s rate decisions. The performance of key stocks and economic indicators will continue to influence market trends in the coming weeks.

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