Three regional Fed presidents already favor tightening, with oil prices reversing June’s PCE tailwind of $48 billion in gasoline savings.
The Federal Reserve left rates unchanged but hinted at a potential hike in September as inflation concerns persist. Three of nine voting regional bank presidents pushed for a rate increase, leaving only two more votes needed to shift the committee’s stance.
June’s PCE inflation dropped to 3.7% from 4.1% in May, driven by $48 billion in reduced gasoline spending during a Middle East ceasefire. However, oil prices have since climbed above $90 per barrel, threatening to reverse that progress.
With geopolitical tensions escalating and energy costs rising, markets are pricing in higher odds of a September rate hike. The Fed’s next move will depend on whether inflation resumes its downward trend or reaccelerates.