SynopsisUS producer prices rose, increasing rate hike expectations for the Federal Reserve. Traders now price a seventy percent chance of a quarter-point increase next week.

Consumer inflation data due Friday will further influence the central bank's decision. Renewed Middle East conflict complicates the inflation outlook with rising oil prices.

Market pricing suggests traders anticipate at least one rate hike by year-end. AgenciesA hotter reading in US producer prices has strengthened bets that the Federal Reserve could raise interest rates as early as next week, with traders now pricing in roughly a 70% chance of a quarter-point hike, according to a Reuters report.

4% in the 12 months through August. While the overall increase was in line with economists' expectations, details of the report suggested some of the recent progress on inflation may be reversing.

For live updates on US Markets, click here Prices for transportation and warehousing jumped in August, while hospital services and airfares also became more expensive. Strong demand linked to the surge in artificial intelligence investment pushed up prices for electronics, adding to evidence that inflationary pressure is not limited to energy.

75% range since December as it tries to bring inflation back to its 2% target. Friday's inflation data could decide the moveThe next major test comes on Friday with the release of US consumer inflation data.

The report could determine whether Thursday's producer-price figures are strong enough to influence the Fed's decision at its September 15-16 meeting." With the PPI data overall still looking relatively hot, the Fed seems likely to hike this year even if it doesn’t pull the trigger this month," Capital Economics analysts wrote.

As for next week's decision, they said, "that still depends on the more important core CPI figure tomorrow." Before Thursday's data, traders had priced in about a 65% chance of a quarter-point hike next week.

That probability has since risen to around 70%, based on Fed funds futures contracts traded at CME Group. The inflation data also came alongside signs that the labour market remains stable, with weekly unemployment insurance claims showing no major deterioration.

That could give policymakers more room to focus on persistent price pressures. Oil raises another inflation concernThe inflation outlook is also being complicated by renewed hostilities in the Middle East, which have disrupted global oil distribution and pushed Brent crude above $100 a barrel.