Political Guyentist
Political Guyentist

Saturday

Full issue
1usInflation and the Fed

Consumer prices rose 0.4% in August and 3.4% over the year, lifting September Fed rate hike odds above 80%

Annual core inflation slowed to 2.4%, and a quarter-point increase on Sept. 16 would be the first Federal Reserve rate hike since July 2023.

What a quarter-point hike would cost a household: The benchmark federal funds target range moves to 3.75%–4.00% — and credit-card and home-equity rates, which track it directly, follow within weeks. If lenders pass the full increase through, a new $400,000 30-year mortgage costs about $65 more a month — roughly $24,000 more over the life of the loan. Inflation-adjusted hourly earnings already fell 0.3% over the year, extending real wage declines to five straight months.

ContextThe Federal Reserve's formal 2% inflation goal applies to personal consumption expenditures, which usually run cooler than consumer prices. Annual consumer price growth averaged 1.5% from 2015 to 2019 and 4.5% from 2021 to 2025. Forecasters at EY-Parthenon reversed their policy call this week, moving from an expected pause to a quarter-point hike.

PBS NEWSHOUR5 sources

2usUpdateIran war

Houthi forces captured Mokha and Perim island in the 28-kilometer Bab el-Mandeb strait.

Saudi Arabia shut its 7-million-barrel-per-day East-West pipeline after drone strikes from Iraq.

On Sept. 9, Houthi missiles and drones struck 4 Saudi cities, wounding 73 people and shutting Aramco's 400,000-barrel-a-day Jazan refinery.

ContextThe Bab el-Mandeb is the Red Sea's southern gate — every ship sailing between the Indian Ocean and the Suez Canal passes through its 28-kilometer width. Oil moving through the Bab el-Mandeb strait was 9.3 million barrels a day in 2023 (the desk's 2026-07-25 shipping figures). Houthi forces held Mokha until coalition troops retook it in February 2017, and Perim until October 2015; holding the strait's eastern shore again puts that traffic within reach of their drones and missiles. Tankers that cannot risk the run detour around southern Africa — a longer route that raises marine insurance rates and, eventually, the price of fuel.

THE HILL9 sources