US Data Pushes Fed Rate Hike Probability to 87 Percent
Equities rose Friday as US inflation data held steady, yet the probability of a Federal Reserve rate hike jumped to 87 percent ahead of next week's decision.
The probability of a Federal Reserve rate hike rose to 87 percent on Friday. This figure reflects updated market expectations following the release of US inflation data. The prior probability stood at 72 percent. The increase occurred despite a steady inflation reading. The data confirmed that core prices rose faster than expected on a monthly basis.
Global stock markets ended the session in positive territory. The FTSE 100 index gained 41.52 points to reach 10,650.44. The S&P 500 added 1.1 percent. The Nasdaq Composite surged 1.3 percent. Bond yields and oil prices retreated from earlier highs. This movement supported equity gains in New York.
Inflation data aligns with forecasts
The US consumer price index rose 3.4 percent year-on-year in August. This figure matched market consensus. Monthly inflation climbed 0.4 percent, up from 0.1 percent in July. Core inflation, which excludes food and energy, cooled to 2.4 percent annually. The annual core rate was in line with expectations. However, the monthly core rate hit 0.3 percent. This exceeded the forecast of 0.2 percent.
European markets show weekly weakness
The FTSE 100 fell 1.7 percent over the week. This marked its worst weekly performance since July. The FTSE 250 dropped 2.5 percent during the same period. The AIM all-share index shed 1.1 percent. In other European markets, the CAC 40 in Paris rose 0.8 percent on Friday. The DAX 40 in Frankfurt also increased by 0.8 percent.
Currency markets showed mixed movements. The pound traded at 1.3523 US dollars, down from 1.3532. Sterling rose to 1.1648 euros from 1.1636. The euro weakened to 1.1605 dollars. The dollar traded at 153.58 yen, down from 154.10.
Analysts predict a single rate lift
Barclays analysts maintain their call for a 25 basis point hike. They view the August data as supportive of this move. Oxford Economics argues the decision remains uncertain. They note that the Federal Reserve’s preferred inflation measure may prove more benign. ING describes the potential hike as a recalibration move. The Dutch bank does not expect a series of hikes. The Bank of England will announce its rate call on Thursday.
