US braces for inflation report that may push Fed to hike rates

Washington – A consumer inflation report due Friday could pave the way towards the US central bank’s first interest rate hike in more than three years, as the war with Iran drives energy costs higher. After data this week showed an uptick in wholesale inflation, all eyes are turning to the Labor Department’s consumer price index (CPI) report for details on how costs are filtering through the world’s biggest economy. A steady or higher inflation figure, particularly when volatile components are excluded, could nudge the Federal Reserve in the direction of raising interest rates as policymakers meet next week, analysts believe. But such a move is sure to draw the ire of President Donald Trump, who has pushed for rate cuts as he faces pressure from voters worried about high costs of living as the midterm elections approach.

Trump has called for lower interest rates this month, even making a surprise threat to cut trade ties with certain countries otherwise. Friday’s report “will seal the deal for a Fed rate hike in September,” Navy Federal Credit Union chief economist Heather Long told AFP. “If the data comes in in line with expectations, or certainly any higher than expectations, a hike is a definite,” she believes. EY Parthenon chief economist Gregory Daco expects policymakers will focus on “core” inflation, which excludes volatile food and energy prices, as they make their rate decisions. Others like KPMG chief economist Diane Swonk anticipate the Fed is likely to raise short-term interest rates before year-end despite “despite intensifying political pressure to cut. ” Economists expect consumer inflation to come in at 3. 4 percent year-on-year in August, according to a forecast published by MarketWatch. This would be the same rate as in July, but still significantly…