CoinTelegraph reports—Fed Chair Kevin Warsh will lead the policy committee this week to finalize the interest rate decision, with markets pricing in over a 92% probability of a 25-basis-point hike. Disagreements among the 12 FOMC voting members have left the final vote outcome uncertain. While the August CPI data and rising energy prices have increased inflationary pressures, some committee members advocate for a wait-and-see approach. The vote result, updated dot plot, and Warsh’s press conference remarks will convey the Fed’s interest rate path for the remainder of the year and test the internal policy consensus within the Fed.
CoinTelegraph APP reports — Federal Reserve Chairman Kevin Warsh faces a challenging voting dynamic this week, as he and other policymakers must determine the current and future path of interest rates. The market widely anticipates a 25-basis-point rate hike at Wednesday’s meeting, but significant分歧 exists among the 12 Federal Open Market Committee voting members, leaving the final vote margin uncertain. Meanwhile, Warsh’s wording in this policy statement is critically important.
Former New York Fed President Bill Dudley offered his assessment of this meeting.
Bill Dudley said: "The market has priced in that if the Fed ultimately holds steady, it would come as a major surprise to the market. This would severely damage the Fed's credibility, equivalent to making threats without taking action."
As of Monday afternoon, the CME FedWatch Tool showed that futures traders priced in a greater than 92% probability of this rate hike, and over a 75% chance of another hike by the FOMC in December. The current federal funds target range remains at 3.50% to 3.75%. This elevated hiking expectation stems from rising oil prices and the August inflation report, which indicated continued upward pressure on prices. Previously, Walsh stated at the Jackson Hole meeting that unless there is clear evidence that inflation is sustainably returning to the 2% target, the Fed will have to act with further rate hikes.
However, current policy decisions contain numerous contradictions. Historically, the Federal Reserve has typically disregarded short-term fluctuations in inflation. Economists generally believe that much of this year’s inflationary increase stems from tariffs and energy supply shocks triggered by the situation in Iran, and the impact of these factors on long-term inflation trends remains uncertain.
Goldman Sachs economist David Mericle said in a client report: “We believe the economic fundamentals do not support raising the federal funds rate; the portion of inflation above the 2% target is attributable to one-time factors that are likely to fade over time.” Even so, Goldman Sachs adjusted its forecast from expecting no rate change to predicting this hike, primarily due to strong market expectations for a rate increase, which are pressuring the Fed to act.
Looking back at the July FOMC meeting, three regional Fed presidents—Lorie Logan of the Dallas Fed, Beth Hammack of the Cleveland Fed, and Neel Kashkari of the Minneapolis Fed—supported a 25-basis-point rate hike. If their positions have not changed, this means four additional committee members would need to shift their stance from supporting a pause to supporting a rate hike.
The most closely watched voting member is Governor Christopher Waller. On September 3, he publicly expressed a preference to hold rates steady at this meeting, while retaining the condition of monitoring data to confirm the trend of cooling inflation. He advocated for patience and cautioned against rushing to raise rates, stating, “What is the cost of waiting for one more meeting? Raising rates by 25 basis points now won’t immediately bring CPI back to 2%.” Overall CPI rose 3.4% year-over-year in August, while core CPI, excluding food and volatile energy prices, was 2.4%, a slight decline of 0.1 percentage point from July.
Waller is not the only one advocating patience; New York Fed President Williams also stated less than two weeks ago that a wait-and-see approach is reasonable. Fed Governor Barr indicated he could accept rate hikes if inflation continues to persist, but would not pre-commit to a position. Influenced by the Jackson Hole speech, markets generally assumed Walsh aligned with the rate-hike camp; Governor Cook stated in early August that she was prepared to raise rates to combat inflation. Meanwhile, Philadelphia Fed President Anna Paulson and Chicago Fed President Austan Goolsbee have recommended maintaining policy patience. The remaining governors include Vice Chair Philip Jefferson, former Chair Jay Powell, and Governor Michelle Bowman, who expressed concerns in May about the potential negative impacts of unnecessary rate hikes.
Another key variable is whether committee members who have been holding back will vote in favor to maintain the Fed’s unified public image if Powell pushes ahead with rate hikes. The voting outcome will not only reveal分歧 among committee members regarding whether inflation is a temporary disturbance or a persistent phenomenon, but also test Powell’s leadership within the Fed. David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, said in his weekly market report: “It’s worth noting that if the Fed hikes rates this time, a retrospective look may show the vote wasn’t as closely divided as it seemed. Once a majority of the committee reaches a consensus on hiking, other members are likely to align, presenting a unified front outwardly—potentially resulting in only two votes, one vote, or even zero votes against.”
After the resolution is implemented, market attention will turn to the Fed’s updated dot plot. The dot plot anonymously records the interest rate projections of the 19 participating committee members. Waugh did not submit his own interest rate forecast in the June dot plot update. Investors will closely monitor the level of support among committee members for two rate hikes this year, as well as the outlook for rates in 2027. This dot plot will also include, for the first time, interest rate projections for 2029. The Fed’s rate hikes or cuts are rarely conducted as isolated actions; policymakers believe that sporadic, single-rate adjustments have limited effectiveness.
David Mericle analyzed that if the vote to raise rates passed by a narrow margin of 10 in favor and 8 opposed, it would indicate that some committee members harbor doubts about this rate hike and do not wish to further elevate market expectations for additional hikes. He added that if more members view this rate increase as merely a routine response to rising oil prices and AI-driven energy demand, and as the beginning of a new tightening cycle, then two rate hikes this year could gain majority support.
Once the committee's vote shows significant division, market attention shifts to Walsh's press conference, focusing on how the Fed Chair conveys the FOMC's overall policy stance. Former New York Fed President Bill Dudley said, "The Fed needs to clearly articulate its assessment of the economy; Walsh must now follow through with actions to match his statements, and if he does, the trust issues left by the first two press conferences can largely be resolved."
At this Fed meeting, while rate hikes appear fully priced in by the market, internal divisions within the FOMC introduce uncertainty to the voting outcome. The core disagreement among members centers on whether inflation is driven by temporary energy factors or will become entrenched. The vote tally, the updated dot plot, and Powell’s press conference remarks will define the interest rate path for the remainder of the year, directly impacting the short-term movements of major assets such as gold, U.S. Treasuries, and USD. Even if a rate hike is implemented, the market will continue to interpret whether this is a one-off increase or the beginning of a new tightening cycle.
Former New York Fed President Bill Dudley offered his assessment of this meeting.
The market pricing strongly favors rate hikes, with inflation data serving as the primary catalyst.
Bill Dudley said: "The market has priced in that if the Fed ultimately holds steady, it would come as a major surprise to the market. This would severely damage the Fed's credibility, equivalent to making threats without taking action."
As of Monday afternoon, the CME FedWatch Tool showed that futures traders priced in a greater than 92% probability of this rate hike, and over a 75% chance of another hike by the FOMC in December. The current federal funds target range remains at 3.50% to 3.75%. This elevated hiking expectation stems from rising oil prices and the August inflation report, which indicated continued upward pressure on prices. Previously, Walsh stated at the Jackson Hole meeting that unless there is clear evidence that inflation is sustainably returning to the 2% target, the Fed will have to act with further rate hikes.
However, current policy decisions contain numerous contradictions. Historically, the Federal Reserve has typically disregarded short-term fluctuations in inflation. Economists generally believe that much of this year’s inflationary increase stems from tariffs and energy supply shocks triggered by the situation in Iran, and the impact of these factors on long-term inflation trends remains uncertain.
Goldman Sachs economist David Mericle said in a client report: “We believe the economic fundamentals do not support raising the federal funds rate; the portion of inflation above the 2% target is attributable to one-time factors that are likely to fade over time.” Even so, Goldman Sachs adjusted its forecast from expecting no rate change to predicting this hike, primarily due to strong market expectations for a rate increase, which are pressuring the Fed to act.
FOMC internal factions are divided, with the dovish and hawkish camps engaging in intense rivalry.
Looking back at the July FOMC meeting, three regional Fed presidents—Lorie Logan of the Dallas Fed, Beth Hammack of the Cleveland Fed, and Neel Kashkari of the Minneapolis Fed—supported a 25-basis-point rate hike. If their positions have not changed, this means four additional committee members would need to shift their stance from supporting a pause to supporting a rate hike.
The most closely watched voting member is Governor Christopher Waller. On September 3, he publicly expressed a preference to hold rates steady at this meeting, while retaining the condition of monitoring data to confirm the trend of cooling inflation. He advocated for patience and cautioned against rushing to raise rates, stating, “What is the cost of waiting for one more meeting? Raising rates by 25 basis points now won’t immediately bring CPI back to 2%.” Overall CPI rose 3.4% year-over-year in August, while core CPI, excluding food and volatile energy prices, was 2.4%, a slight decline of 0.1 percentage point from July.
Waller is not the only one advocating patience; New York Fed President Williams also stated less than two weeks ago that a wait-and-see approach is reasonable. Fed Governor Barr indicated he could accept rate hikes if inflation continues to persist, but would not pre-commit to a position. Influenced by the Jackson Hole speech, markets generally assumed Walsh aligned with the rate-hike camp; Governor Cook stated in early August that she was prepared to raise rates to combat inflation. Meanwhile, Philadelphia Fed President Anna Paulson and Chicago Fed President Austan Goolsbee have recommended maintaining policy patience. The remaining governors include Vice Chair Philip Jefferson, former Chair Jay Powell, and Governor Michelle Bowman, who expressed concerns in May about the potential negative impacts of unnecessary rate hikes.
Another key variable is whether committee members who have been holding back will vote in favor to maintain the Fed’s unified public image if Powell pushes ahead with rate hikes. The voting outcome will not only reveal分歧 among committee members regarding whether inflation is a temporary disturbance or a persistent phenomenon, but also test Powell’s leadership within the Fed. David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, said in his weekly market report: “It’s worth noting that if the Fed hikes rates this time, a retrospective look may show the vote wasn’t as closely divided as it seemed. Once a majority of the committee reaches a consensus on hiking, other members are likely to align, presenting a unified front outwardly—potentially resulting in only two votes, one vote, or even zero votes against.”
The bitmap and the chairperson's press conference will determine the subsequent market direction.
After the resolution is implemented, market attention will turn to the Fed’s updated dot plot. The dot plot anonymously records the interest rate projections of the 19 participating committee members. Waugh did not submit his own interest rate forecast in the June dot plot update. Investors will closely monitor the level of support among committee members for two rate hikes this year, as well as the outlook for rates in 2027. This dot plot will also include, for the first time, interest rate projections for 2029. The Fed’s rate hikes or cuts are rarely conducted as isolated actions; policymakers believe that sporadic, single-rate adjustments have limited effectiveness.
David Mericle analyzed that if the vote to raise rates passed by a narrow margin of 10 in favor and 8 opposed, it would indicate that some committee members harbor doubts about this rate hike and do not wish to further elevate market expectations for additional hikes. He added that if more members view this rate increase as merely a routine response to rising oil prices and AI-driven energy demand, and as the beginning of a new tightening cycle, then two rate hikes this year could gain majority support.
Once the committee's vote shows significant division, market attention shifts to Walsh's press conference, focusing on how the Fed Chair conveys the FOMC's overall policy stance. Former New York Fed President Bill Dudley said, "The Fed needs to clearly articulate its assessment of the economy; Walsh must now follow through with actions to match his statements, and if he does, the trust issues left by the first two press conferences can largely be resolved."
Conclusion
At this Fed meeting, while rate hikes appear fully priced in by the market, internal divisions within the FOMC introduce uncertainty to the voting outcome. The core disagreement among members centers on whether inflation is driven by temporary energy factors or will become entrenched. The vote tally, the updated dot plot, and Powell’s press conference remarks will define the interest rate path for the remainder of the year, directly impacting the short-term movements of major assets such as gold, U.S. Treasuries, and USD. Even if a rate hike is implemented, the market will continue to interpret whether this is a one-off increase or the beginning of a new tightening cycle.