For much of this year, investors had been focused on when the Federal Reserve might cut interest rates further. That conversation has shifted in recent weeks toward the opposite question: whether the Fed could raise rates instead.
Market pricing has moved toward pricing in a quarter point, or 25 basis point, increase at the Fed's upcoming September meeting. That shift followed the central bank's decision to hold rates steady at its July meeting, which analysts say lowered the bar for a move in September if incoming data continues to point that way.
The Federal Reserve sets a short term interest rate that influences borrowing costs across the economy, from mortgages to credit cards to business loans. A rate increase, rather than the cuts many investors had been expecting earlier in the year, would mark a shift in the Fed's approach and would likely be read as a signal that policymakers see continued upward pressure on prices in the economy.
It is worth stressing that this remains a market expectation rather than a locked in decision. Fed officials will weigh incoming economic data, including inflation and employment figures, in the weeks before their meeting, and policy announcements can still shift right up until the decision itself.
Watch upcoming inflation and jobs data in the first half of September, along with any public remarks from Federal Reserve officials, for further signals on which way the September rate decision may go.
Has the Fed already decided to raise rates?
No, this is currently a market expectation based on recent data and commentary, not a confirmed decision; the Federal Reserve's actual announcement comes at its September meeting.
Why does a possible rate hike matter to ordinary people?
The Fed's rate influences borrowing costs throughout the economy, so a hike could mean higher rates on things like mortgages, auto loans, and credit cards.