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Fed meeting faces rate-hike uncertainty as oil lifts inflation fears

Federal funds futures implied about a 40% chance of a hike ahead of the meeting, while traders later saw roughly a 34% chance for this week and full pricing for September.

Reported · Written up by our desk · Central Banks

LiveMint Markets reports the Federal Reserve is widely expected to keep interest rates unchanged on Wednesday, but investors are focused on the possibility of a surprise hike.

The uncertainty centers on Fed Chair Kevin Warsh, who has emphasized bringing inflation down but has not clearly indicated whether raising rates would be necessary. With inflation still above the Fed’s 2% target, pressure has grown to keep rates higher for longer, LiveMint Markets said.

In the run-up to the decision, federal funds futures implied a 40% probability of a hike. As of Tuesday afternoon, investors saw about a 35% chance, a relatively high level of uncertainty before a Fed meeting.

Ahead of the Fed statement and Warsh’s scheduled second post-meeting press conference, markets also weighed a sharp rise in oil prices tied to the Middle East conflict. LiveMint Markets reported U.S. stocks fell in early trading, with the Dow down 0.8% to 52,307.48, the S&P 500 down 0.1% to 7,419.91, and the Nasdaq Composite down 0.1% to 24,850.62, while spot gold dropped 1.2% to $4,026.49 per ounce and oil was up more than 6%.

Latest closeGold $4,023.80 ▼1.2%|S&P 500 7,428.78 ▲0.2%|Nasdaq Comp. 24,876.91 ▼0.2%

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