Investors are increasingly preparing for the Federal Reserve to hike interest rates as oil prices climb.
Fed funds futures are pricing in a roughly 82% likelihood that the central bank lifts borrowing costs at its September policy meeting, according to CME’s FedWatch tool
A week ago, those odds sat below 53%. The central bank is still broadly expected to keep rates unchanged at the current 3.50% to 3.75% at its gathering next week. But even then, there’s a growing minority planning for an increase: Fed funds futures trading indicates a nearly 38% probability of a quarter percentage point hike, up from less than 12% a week ago.
Brent, the global crude benchmark, hit $100 a barrel on Thursday for the first time since late May amid a new round of tit-for-tat attacks between the U.S. and Iran. The average price for a gallon of gasoline in the U.S. reached $4 per gallon this week — the highest in more than a month, according to AAA. Thursday’s employment data bolstered the view that the Fed can focus more on inflation — which could accelerate as energy prices climb — than the health of the labor market.