Fed Rate Hikes May Prove Ineffective as Iran War, AI Boom Drive Inflation

Odaily News: Federal Reserve officials have signaled they are prepared to raise interest rates if inflation does not improve soon. However, they may find that their primary policy tool is unlikely to have much of a dampening effect on some of the factors currently driving prices higher. According to futures contracts, investors now see about a 60% probability that the Fed will raise rates at its Sept. 15-16 meeting.

Stephanie Roth, chief economist at Wolfe Research, said, "The key factors pushing inflation above trend are the Iran war, tariffs and the chip shortage. Even one or two Fed rate hikes are unlikely to fundamentally change this backdrop." (Bloomberg)