Fed to raise interest rates to 3.75%-4.00% on September 16 – Reuters poll

A Reuters poll has indicated that 86 out of 101 economists anticipate the Federal Reserve (Fed) to increase interest rates by 25 basis points to a range of 3.75%-4.00% on September 16. This marks a significant change from the previous survey where only 65 of 93 economists predicted a rate hold. The poll also revealed that 37 of 70 economists foresee at least two further hikes in the Fed funds rate by the end of March 2027, a stark contrast to the previous 21 economists' estimate.

The Federal Reserve is responsible for maintaining the US economy's price stability and full employment through adjustments in interest rates, its primary instrument. When inflation exceeds the Fed's 2% target, the Fed raises rates, heightening borrowing costs throughout the economy and strengthening the US Dollar (USD). Conversely, if inflation drops below 2% or unemployment becomes excessive, the Fed may lower rates to stimulate borrowing, which in turn weakens the USD.

The Fed convenes eight policy meetings annually during which the Federal Open Market Committee (FOMC) evaluates economic conditions and makes monetary policy decisions. Consisting of twelve officials, the FOMC comprises the seven Board of Governors members, the president of the Federal Reserve Bank of New York, and four rotating regional Reserve Bank presidents.

In exceptional circumstances, the Fed might employ Quantitative Easing (QE), a non-standard measure used during crises or periods of extremely low inflation. This involves the Fed injecting more Dollars into the financial system by purchasing high-grade bonds from banks, which can weaken the USD. Conversely, Quantitative Tightening (QT) is the process of reducing the Fed's bond purchases, typically strengthening the USD.

The AUD/USD pair dipped to a one-and-a-half-week low around 0.7140 during Monday's Asian session, though it lacked follow-through, trading just above the mid-0.7100s, down 0.25% for the day. Similarly, the USD/JPY pair saw some buying early in the week and rose towards the 154.00 mark, reversing part of Friday's losses, although it remained within a narrow range near a nearly seven-month low as traders await upcoming central bank events.

Meanwhile, Pi Network (PI) has shown signs of recovery, trading above $0.097 following two weeks of gains, driven by continued ecosystem development and improved developer tools. Meanwhile, technical indicators suggest a tentative recovery, but overhead Exponential Moving Averages pose a challenge to further PI gains. Canada's August Consumer Price Index figures will be closely watched on Monday as they provide insight into price pressures following the Bank of Canada's September 2 meeting, where officials maintained interest rates at 2.25%, in line with analyst expectations.