Despite Falling Oil Prices, There's Now a 73% Chance of an Interest Rate Hike by September -- Here Are the 2 Culprits to Blame
2026-07-15 08:06
•Sean Williams •The Motley Fool
••••••••• • Axe Capital view
Why the Fed May Hike Despite Falling Oil Prices
Supply shocks from Iran tensions and AI hardware demand keep inflation sticky, pushing rate hike odds higher.
Oil prices have eased recently, which usually cools inflation worries, but the market is now priceing in a 73% chance the Fed will raise rates by mid-September. The reason? Two stubborn inflation drivers. First, Iran-driven disruptions continue to ripple through global supply chains, keeping costs elevated beyond oil. Second, the surprising inflation punch comes from AI infrastructure build-out, with GPUs and memory chip prices surging as companies race to upgrade tech. For South Africa, this means the rand may remain pressured, as these global factors keep the US dollar firm. Look at the USD/ZAR pair—it’s likely to stay elevated, which is a headwind for import-heavy sectors. Local inflation might also stay sticky, complicating Reserve Bank decisions. Sasol might benefit slightly if oil nudges back up but is not immune to global cost pressures. This view could be proven wrong if geopolitical tensions ease sharply or AI demand cools off. this is just my opinion and not financial advice
I would watch USD/ZAR closely and avoid big rand shorts for now. Hold Sasol but be ready to trim on any strong rallies, given cost risks and rand weakness.
- USD/ZAR
- Sasol
- Geopolitical tensions easing faster than expected
- AI hardware demand slowing abruptly
6/10
The probability of a Federal Reserve interest rate hike by September 16 has surged from 26% to 73% despite falling oil prices. Two main culprits are driving inflation: spillover effects from the Iran war into the broader economy through supply chain disruptions and higher production costs, and the AI infrastructure build-out causing GPU and memory/storage prices to skyrocket. Core PCE inflation reached 3.4% in May, the highest since October 2023, marking 63 consecutive readings above the Fed's 2% target.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: Sean Williams
Categories: Macro, Central Banks, Inflation, Rates, Commodities, Geopolitics, Technology, AI, Semiconductors
Tickers: CME
Sentiment: Neutral - CME Group is mentioned as the source of the FedWatch Tool data used to track interest rate hike probabilities. The company itself is not directly impacted by the inflation or rate hike concerns discussed; it is merely cited as a data provider.
Keywords: interest rate hike, inflation, Federal Reserve, oil prices, Iran war, Core PCE, AI infrastructure, GPU prices
Insights:
- CME: Neutral: CME Group is mentioned as the source of the FedWatch Tool data used to track interest rate hike probabilities. The company itself is not directly impacted by the inflation or rate hike concerns discussed; it is merely cited as a data provider.