The U.S. Federal Reserve is widely expected to raise interest rates for the first time in three years at the end of its policy meeting today (Sept. 16).
Financial markets have priced in a 92% chance that the U.S. central bank will raise interest rates by 25 basis points, which would be the first rate hike in the U.S. since July 2023.
The Fed and Chair Kevin Warsh are under pressure to raise interest rates with inflation having been stubbornly above the central bank’s 2% target for more than five years.
Complicating matters for the Federal Reserve are oil prices that have steadily risen over the last month amid escalating violence in the Middle East.
West Texas Intermediate (WTI) crude oil, the U.S. standard, rose 4% on Sept. 15 to trade above $105 U.S. a barrel.
Brent crude oil, the international benchmark, gained 3% to reach $108.50 U.S. per barrel. Rising oil prices spark inflation throughout the economy and lead to higher prices for consumers.
The U.S. central bank is also contending with rising bond yields.
Heading into the Fed’s two-day meeting, the yield on the benchmark 10-year Treasury rose above 5% and reached its highest level since 2007.
The 10-year Treasury stood at 5.006% at the close of trading on Sept. 15 as bond traders’ price in a higher rate environment moving forward.
Journalists and market observers will be watching the Fed’s decision on interest rates and Warsh’s press conference for signs of independence from the central bank.
In recent weeks, U.S. President Donald Trump has warned Warsh, who he appointed, not to raise interest rates.
Trump has called on the central bank to slash U.S. interest rates to the lowest level in the world and help ignite the economy and stock market.
The trendsetting Federal Funds Rate is in a range of 3.50% to 3.75% heading into the Sept. 16 decision by the central bank.
