The Federal Reserve heads into its Sept. 15-16 meeting with the outcome hinging on inflation data due this week, after Chairman Kevin Warsh signaled a hawkish shift and a strong August jobs report added to the case for a hike. Fed officials remain split on the path, with some pushing to act now and others waiting on the numbers.
Inflation data looms before the vote
The Bureau of Labor Statistics releases the Producer Price Index for August on Sept. 10 and the Consumer Price Index on Sept. 11, just days before the Federal Open Market Committee meets. Cool readings on both could keep the Federal Funds Rate on hold at 3.50%-3.75%. Hot prints, however, could tip the committee toward a hike.
Warsh signals a hawkish turn
Warsh used an Aug. 28 speech to pledge that the central bank would work to tame elevated inflation. According to TheStreet: "We have work to do." That commitment reset market expectations, and the CME Group FedWatch Tool now shows a 25-basis-point hike probability near 60% for this month.
Officials remain divided
Fed Governor Christopher Waller said on Sept. 3 he is tilting toward holding rates steady if the new data shows price pressures continuing to moderate, though he added that hot CPI and PPI figures could shift his support toward a hike. New York Fed President John Williams called recent inflation numbers encouraging, pointing to tariffs and higher energy prices from the Iran War as the biggest drivers still in play. Cleveland Fed President Beth Hammack, one of three FOMC members who dissented in favor of a hike in July, said in a Sept. 4 post that it is time to act.
Strong jobs data complicates the picture
The Sept. 4 jobs report showed the labor market topping estimates while the unemployment rate held at 4.1%, even as the economy absorbs higher energy prices tied to the Iran War. The FOMC voted 9-3 last month to hold rates in the 3.5%-3.75% range, with the three dissenters pushing for a 25-basis-point hike on inflation concerns. That vote followed three straight 25-basis-point cuts in late 2025, made to shore up a softening labor market before policymakers judged that inflation risk outweighed signs that the jobs market was stabilizing.
Source: TheStreet (via Yahoo Finance)
Trading involves risk.
Risk Disclaimer
