Markets on edge as US Fed meets to tackle high inflation

LONDRES: Oil prices jumped, US bond yields rallied and equities retreated Tuesday (Sep 15) as the Federal Reserve looked set to raise interest rates, with high inflation and AI concerns dominating market sentiment.

Brent crude futures again pushed towards US$110 a barrel, while average diesel prices in the United States struck a record high of just under US$6.27 a gallon, heaping pressure on US President Donald Trump ahead of midterm congressional elections.

"There's no let-up in the volatility rippling through financial markets, with energy prices staying painfully elevated and worries swirling about the knock-on effect for inflation and interest rates," said Susannah Streeter, chief investment strategist at Wealth Club.

The yield on the 10-year US Treasury note hit 5.03 per cent, a level last seen in 2007 before the global financial crisis, as investors price in a likely hike in US interest rates.

The US Federal Reserve began a rate-setting meeting Tuesday with markets expecting policymakers to pull the trigger on a hike to tackle persistently high consumer prices in the world's biggest economy.

Market expectations for a 25-basis-point rate increase have risen sharply after official data published last week showed US annual inflation remaining far above the Fed's target.

With the crisis in the Middle East showing little sign of abating and Yemen's Houthi rebels taking control of a crucial outlet for shipping, crude has spiked this month to more than US$100 a barrel.

The surge in energy costs has ramped up pressure on central banks to raise borrowing costs.

The European Central Bank last week lifted interest rates in the eurozone.

The Bank of England is forecast to maintain its benchmark rate on Thursday as the UK economy struggles for growth.

Wall Street's main indices were lower in late morning trading on Tuesday, following losses in Europe and Asia.

There was renewed weakness for technology stocks after executives driving the AI sector said advances in artificial intelligence should be slowed.

"It looks as if investors are happier reducing some risk now, rather than leaving all their chips on the table, and mostly on the chip sector," said Trade Nation analyst David Morrison.

Trump on Monday dismissed fears that artificial intelligence could wipe out humanity, repeatedly calling them a hoax and rejecting global calls to put guardrails around the fast-moving technology.

Anthropic chief Dario Amodei, whose company makes the popular Claude AI system, opened the floodgates on Saturday when he called for the sector to slow down.

His comments were echoed by OpenAI's Sam Altman and SpaceXAI's Elon Musk.

Microsoft on Monday published a "humanist AI code of conduct" as the concerns grew.

"AI should not exceed human control. Models should remain subordinate to humanity," read one part.