Sean Williams, The Motley Fool Wed, October 14, 2026 at 4:26 AM EDT 6 min read ^DJI -0.35% ^IXIC -0.15% NVDA +0.97% Trade NVIDIA on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Today (Oct. 14) marks another important stepping stone for Wall Street, investors, and the Federal Reserve. At 08:30 a.m. ET, the Bureau of Labor Statistics will publish the September inflation report. In addition to being the final puzzle piece to calculate Social Security's 2027 cost-of-living adjustment, this inflation report should play an important role in formulating the central bank's monetary policy.
To date, the evolution of artificial intelligence (AI) has catapulted the Dow Jones Industrial Average (DJINDICES:^DJI), S&P 500 (SNPINDEX:^GSPC), and Nasdaq Composite (NASDAQINDEX:^IXIC) to several record highs. But sweeping persistently elevated inflation under the rug is becoming nearly impossible, thanks to Trumpflation (inflation derived from President Donald Trump's policies), among other factors.
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President Trump's policies are having a clear impact on consumer prices. Image source: Official White House Photo by Molly Riley.
The next Federal Open Market Committee (FOMC) meeting is two weeks away. According to the CME Group's (NASDAQ:CME) proprietary FedWatch Tool, which uses 30-day Fed Funds futures prices to track the probability of changes to the federal funds target rate, the odds of a rate hike on Oct. 28 have plummeted to just 17% as of Oct. 9.
But this doesn't mean FOMC policymakers are anywhere close to accomplishing their goal of delivering price stability.
The September-released Summary of Economic Projections, commonly known as the "dot plot," showed that 16 of 18 policymakers (not all of whom vote) forecast another rate hike before the end of this year.
Meanwhile, the CME's FedWatch Tool projects a high likelihood of several rate hikes by Sept. 15, 2027. There's less than a 6% chance of the federal funds target rate remaining unchanged or rising by 25 basis points (bps) to 4.00%-4.25% over the next 11 months. By comparison, there's a:
2.4% chance rates rise by 150-175 bps (5.25%-5.75%)
In other words, the odds of the Fed getting more aggressive are rising, and entrenched Trumpflation is mostly to blame.
To be clear, Trump's policies are far from the only source of inflation. It's perfectly normal for prices to rise in an expanding economy.
We're also seeing clear evidence of the AI infrastructure build-out increasing consumer prices and boosting the prevailing inflation rate. But it's Trumpflation that's most directly impacting consumers' wallets.
President Trump's tariffs have been increasing prices on consumer goods for more than a year. Though tariffs are designed to protect American jobs, encourage domestic manufacturing, and make U.S. goods more price-competitive with those brought in from foreign markets, they're an imperfect tool. Adding duties to unfinished goods can increase production costs, which are then passed on to consumers.
The Trump-led Iran war is having an even bigger impact on prices. The ongoing closure of the Strait of Hormuz has led to the largest energy supply disruption in modern history, sending fuel prices soaring. Furthermore, evidence is mounting that the inflationary effects of the Iran war have spilled beyond the energy sector into the broader economy.
The longer Trumpflation persists, the more damaging it could be to Wall Street's AI-driven bull market. If higher lending costs slow the AI infrastructure build-out, even marginally, it may be game over for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite.
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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group. The Motley Fool has a disclosure policy.
News Flash: Trumpflation Is Expected to Ramp Up the Fed's Rate-Hiking Cycle in 2027 was originally published by The Motley Fool
