Fed may raise rates in September

Latest US economic data make investors, big banks bet Fed start raising rates from September.

June 25, CME Group futures trading data show investors reduce bets US Federal Reserve (Fed) raise rates in July meeting. Chance now only 30%, down from near 40% before.

However, probability Fed raise rates in September up to 80%. In last week meeting, Fed kept benchmark rate at 3.5-3.75%.

According to US Commerce Department data, May personal consumption expenditures (PCE) index rose 4.1% year-on-year - highest since April 2023. PCE is Fed preferred inflation gauge. Agency set 2% inflation target, not reached for over 5 years.

Fed Chair Kevin Warsh in press conference June 17, 2026 in Washington (US). Photo: AFP

In first meeting this month, new Fed Chair Kevin Warsh declared he, officials will reach inflation goal. Analysts, investors say statement means Fed raise rates soon.

Past week, big banks like Bank of America (BofA), Deutsche Bank also expect Fed raise rates in September. Reason: US economy still active, Warsh show hawkish stance.

BofA forecast Fed raise rates 25 basis points (0.25%) in September, October, December. This is most aggressive forecast among global big banks. Meanwhile, Deutsche Bank think Fed only raise twice in September, December, same size. Next year, both banks forecast Fed keep rates unchanged.

Still, excluding volatile food, energy, US May core PCE only rose 3.4% year-on-year. Martin Beck - Chief Economist at PPHC consulting, said compared to April, core PCE not even accelerate.

"May PCE report shows inflation fight not over, but not clear sign underlying price pressure accelerating again," he said. Fuel prices - big contributor to May PCE surge - dropped significantly. So, "Fed can stay patient instead of panic."

Global crude prices fell near pre-war levels after US, Iran ended peace talks in Switzerland early this week. Brent crude now $74 per barrel, US crude $71.