The Fed Is Cornered: Markets Await the Verdict at Jackson Hole
U.S. inflation has once again forced investors to reassess their expectations for the Fed’s interest rate policy. The PCE price index — the central bank’s key inflation gauge — rose 3.7% year over year in July, while the core reading, excluding food and energy, remained at 3.3%. Both figures are still well above the Fed’s 2% target.
The market reaction has been cautious. The dollar is holding near an eight-day high, while the probability of a Fed rate hike as early as September is now estimated at around 40%. Investors are now turning their attention to Jackson Hole, where Fed Chair Kevin Warsh will speak on August 28.