Fed rate hikes may prove less effective as Iran war, AI boom fuel inflation

Odaily News: Federal Reserve officials have signaled that they are prepared to raise interest rates if inflation does not improve soon. However, they may find that their primary policy tool is unlikely to have much suppressive effect against some of the factors currently driving prices higher. According to futures contracts, investors currently estimate the probability of a Fed rate hike at the September 15-16 meeting at approximately 60%.

Stephanie Roth, chief economist at Wolfe Research, said, "The key factors pushing inflation above trend levels are the Iran war, tariffs, and chip shortages. Even if the Fed raises rates once or twice, it is unlikely to fundamentally change this backdrop."