Copper edges lower as US inflation boosts bets on Federal Reserve rate hikes

Copper just went from record-breaker to retreat mode in a matter of days. After surging past $14,500 per metric ton on the London Metal Exchange earlier this month, the industrial metal is sliding as fresh US inflation data rewrites the script on Federal Reserve policy expectations.

The culprit: a CPI print that came in hotter than Wall Street wanted. Headline inflation rose 0.4% month-over-month and 3.4% year-over-year as of September 11, while core CPI, which strips out food and energy, climbed 0.3% on the month.

Rate hike odds surge past 85%

Markets wasted no time recalibrating. The probability of a Federal Reserve rate hike at the September 15-16 FOMC meeting has jumped to roughly 85-88%, according to market-implied pricing.

For copper, the math is straightforward but punishing. Higher interest rates strengthen the dollar, which makes dollar-denominated commodities more expensive for international buyers. They also raise borrowing costs for the construction and manufacturing sectors that consume the bulk of global copper supply.

The dynamic has been a recurring theme throughout 2026. Persistent inflation, driven in large part by volatile energy prices, has kept the Fed in a hawkish posture under Chair Kevin Warsh. Markets have priced in multiple rate hikes across the year, creating a headwind that has periodically dragged on both industrial and precious metals.

From record highs to reality check

The timing of this pullback is particularly notable given where copper was trading just weeks ago. Earlier in September, prices on the LME blew past $14,500 per metric ton, while COMEX copper neared $6.8 per pound. Those were record-high levels, fueled by a combination of tight global supply and growing concerns about potential tariffs disrupting trade flows.

The International Energy Agency has repeatedly flagged copper as one of the critical minerals most at risk of a supply shortfall in the coming decade.

What traders are watching now

The September 15-16 FOMC meeting is the immediate focal point. With rate hike odds already baked into the high 80s percentage-wise, the real question is what the Fed signals about the path beyond September. A single 25-basis-point hike is one thing. Guidance suggesting more hikes are coming would be a different kind of headache for copper bulls.

Fed Chair Warsh’s rhetoric throughout 2026 has leaned consistently hawkish, emphasizing that the central bank won’t back down from its inflation mandate even as higher rates create friction in parts of the economy. Energy-related inflation has proven particularly stubborn, giving policymakers little room to pivot toward accommodation.

For copper specifically, the interplay between the stronger dollar and international demand is critical. China remains the world’s largest copper consumer, and a rising greenback effectively raises the price tag for Chinese buyers. If the dollar continues to strengthen on the back of rate hikes, import demand from Asia could soften further, adding another layer of downward pressure.

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