Fed Rate Decision and August Retail Sales Data Set to Drive Wall Street This Week

The Federal Reserve's interest rate decision will dominate Wall Street's attention this week, with the central bank set to conclude its two-day policy meeting on Wednesday.

Policymakers could raise the benchmark interest rate as they try to bring down inflation that has remained stubbornly high. The Fed has so far kept rates steady while monitoring price pressures, which continue to run well above its 2% target. Markets have been pricing in at least one rate increase before the end of the year.

A hike would make borrowing more expensive and could slow economic growth, a trade-off officials have weighed as they seek to cool inflation.

Inflation has shaped the Fed's rate policy throughout the year. The pace of price increases has held above 3%, driven in part by the U.S. war with Iran and its effect on global oil supplies. The conflict has effectively shut down the Strait of Hormuz, a route that carried about a fifth of the world's oil before fighting began in February.

Higher crude prices pushed up gasoline costs, straining household budgets directly at the pump and indirectly through more expensive shipping.

The Fed has also faced pressure from President Donald Trump, who has called for lower interest rates instead. Such a move could stimulate the economy but risks intensifying inflation.

Separately, Wall Street will receive an update on U.S. retail sales for August on Wednesday. The figures could shed light on how and where consumers are spending as they contend with elevated inflation and slower wage growth.