A Federal Reserve rate hike seems increasingly certain next week following the release of the August consumer price index, which showed an annual inflation rate of 3.4%, well above the central bank’s 2% target. Fed Chairman Kevin Warsh had warned in late August at Jackson Hole that he would be tough on inflation, and investors believe he would lose credibility if he failed to raise rates. Oil prices crossed above $100 per barrel this week, pushing Treasury yields higher, with the 10-year rate approaching 5%. The current target rate stands between 3.5% and 3.75%, and futures contracts suggest roughly a 50% probability of reaching a 4% to 4.25% range by December.
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