Fed expected to raise rates Sept. 16 as inflation stays above target

The Federal Reserve is expected to raise interest rates by a quarter percentage point on Sept. 16, with August consumer inflation at 3.4%, still above its 2% target, according to CNBC. A quarter-point increase would lift the federal funds target range to 3.75% to 4%, from the current 3.5% to 3.75%.

Wednesday’s decision may not be the last increase of the year. Fed funds futures showed a nearly 50% probability of rates reaching 4% to 4.25% at the December meeting, implying two quarter-point hikes, CNBC reported, citing the CME FedWatch Tool. The 10-year Treasury yield remained above 4.9% on Friday after approaching 5%.

The labor market was still adding jobs in August. Nonfarm payrolls increased by 162,000, with unemployment at 4.1%, according to OnEquity’s weekly outlook. The Fed’s updated projections, due alongside its policy decision at 2 p.m. Eastern on Wednesday, will cover unemployment, economic growth, inflation and interest rates, according to TradingKey. Its rate projections represent individual policymakers’ judgments, not a commitment to a future path.

The week also brings fresh readings on employment and demand. ADP’s weekly employment change is scheduled for Tuesday, followed by August retail sales on Wednesday and initial unemployment claims on Thursday, according to CNBC’s calendar. Housing starts are due Thursday, with industrial production and capacity utilization scheduled for Friday.

Lennar will give investors a company-level read on housing demand when it releases fiscal third-quarter results after Wednesday’s market close and holds its earnings call Thursday, according to TradingKey. The homebuilder previously forecast new orders of 21,000 to 22,000 homes and deliveries of 20,500 to 21,500.