Rising gasoline prices have contributed to accelerating <a s midterm elections.
US consumer <a s ongoing conflict with Tehran drove energy costs up, increasing pressure on American households ahead of next month's midterm elections.
The increase highlights voter <a s October 27-28 policy meeting, though many observers expect the Federal Reserve to act with caution.
Economist James Knightley at ING noted that Fed officials John Williams, Philip Jefferson and Christopher Waller have suggested “that we don’t need to see back-to-back interest rate increases,” instead leaning towards “a slow and steady” approach.
He expects the Fed will want to be “careful and cautious in terms of its policy tightening.”
Traders currently estimate a 37.1 percent probability that the Fed will raise rates by another 25 basis points in October, up from approximately 22 percent the previous day.
“We expect at least two more rate hikes by early 2027, starting in December,” said KPMG chief economist Diane Swonk. “September gave the Fed more reason to hike, even if officials hold in October.”
Sectors sensitive to interest rates, such as housing, are already feeling the strain of higher borrowing costs.
Yields on US government bonds climbed following the inflation report. The 10-year Treasury yield, which impacts mortgage and auto loan rates, increased to 5.3 percent from 5.2 percent, though it has since moderated.
“Energy lit the match; sticky services, shelter and goods prices kept the fire burning,” said KPMG’s Swonk of the inflation report.
Energy prices have climbed significantly since the United States and Israel attacked Iran in late February, leading Tehran to close the Strait of Hormuz, a critical passage for oil and gas shipments.
