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There's overwhelming consensus that the Fed will raise interest rates on Sept. 16 — its first hike since 2023.
Friday's August inflation data all but sealed it: odds of a hike jumped to about 90% on CME FedWatch, from 70% the day before.
I chatted with Dan North, senior economist at Allianz Trade North America, shortly after the consumer price index report was released.
Here's how to really understand it:
The good: “Things came in mostly as expected,” said North.
The bad: “Core was a little bit hot.” He’s referring to inflation stripped of food and energy.
The ugly: Higher energy prices due to the Iran conflict “spilled over into the core.”
Record diesel fuel costs, for example, “permeates through the economy” in the form of trucking and other transport of goods.
“And crude oil itself is in everything. It's in plastics and fertilizer and synthetic clothing and many, many other things.”
What’s overlooked: Shelter. ”Being a third of the index, that’s going to support those inflationary prices,” said North.
What’s next: He expects the Fed to hike in a few days, probably again in December, and maybe a third time in the first half of next year. “It all depends on the war,” he said.
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