Cleveland Fed Sees US Inflation Rising in July and August, Prompting Central Bank to Continue Raising Rates

The Cleveland Federal Reserve is expecting the U.S. Consumer Price Index to rise in July and August, which could fuel the central bank to raise interest rates further.

The latest update of inflation forecast by the Federal Reserve of Cleveland saw U.S. inflation rising from 3.0% in June to 3.42% in July and 3.89% in August. Meanwhile, core inflation is expected to rise from 4.8% in June to 4.92% in July before edging down to 4.75% in August.

The forecast was higher than the market consensus that sees CPI rising 3.3% in July, while core CPI is seen at 4.7%.


According to CME FedWatch Tool, 86.50% of the market expects the Fed to maintain rates at 5.25-5.50% and only 13.50% believes that the Fed will raise rates by another 25 basis point in the next meeting in September.

The probability for the Fed to maintain rates in November declines to 69.1%, while 28.11% sees a quarter-percentage rate hike and 2.70% expects to go beyond with 50bps hike.