Fed September Rate-Hike Odds Jump to 73% as Core PCE Hits 3.4%
Updated
Updated · The Motley Fool · Jul 15
Fed September Rate-Hike Odds Jump to 73% as Core PCE Hits 3.4%
3 articles · Updated · The Motley Fool · Jul 15
Summary
CME FedWatch put the chance of a Federal Reserve rate increase by the Sept. 16 FOMC meeting at 73% on July 12, up from 26% on June 12.
May inflation drove that repricing: headline U.S. inflation reached 4.2%—a three-year high—while Core PCE rose to 3.4%, its highest since October 2023 and a 63rd straight reading above the Fed's 2% target.
Falling oil has not eased concerns, with WTI dropping from nearly $118 a barrel on April 7 to $74 by July 12 even as Iran-war supply disruptions keep lifting transport, production and petroleum-based goods costs.
June 16-17 Fed minutes also flagged AI infrastructure as a fresh inflation source, as shortages and heavy demand push up GPU and memory prices before productivity gains can offset them.
That mix of war-related spillovers and AI-driven cost pressure threatens the stock market's AI-led rally, even after the Dow, S&P 500 and Nasdaq logged record closes since early June.
With AI stocks booming, can the Fed tame inflation without triggering a massive market downturn?
Are war and the AI boom creating a new kind of inflation that falling oil prices cannot fix?
Will war-driven shortages in fertilizers and minerals permanently raise our food and tech prices?
Inflation, Energy Shocks, and the Fed: Navigating the 2026 U.S. Economic Crossroads
Overview
As of July 16, 2026, the U.S. economy shows a mixed picture, with persistent inflationary pressures remaining a central concern for the Federal Reserve. While some sectors display resilience and moderation, inflation continues to be closely monitored through key indicators like the PCE price index. The Federal Reserve, now under new leadership, faces a complex policy landscape and is responding to these challenges with a more hawkish stance. Recent data, such as a cooler-than-expected CPI report, has reduced the urgency for immediate rate hikes, but underlying inflation and global events keep the outlook uncertain.