Federal Reserve policymakers convene this week. The market expects a 25‑basis‑point rate hike, with the CME FedWatch tool assigning a 92.5% probability to the move and a 7.5% chance of no change.
Yields climb to decade high
The 10‑year Treasury yield hovered near 5%, its highest level since 2007. Investors weigh higher U.S. debt costs against foreign sovereign and corporate issuance.
Inflation data stay above target
July personal consumption expenditures rose 3.7% annually, while core PCE increased 3.3%. August CPI climbed 3.4% and core CPI rose 2.4%, keeping inflation well above the Fed’s 2% goal.
Hirt warns of adverse reaction if Fed stays put
Vanguard senior economist Josh Hirt told FOX Business that recent inflation reports make a negative market reaction likely if the Fed does not raise rates on Wednesday. Unless its communication is exceptionally strong, the market may react adversely.
Warsh signals focus on prices
Warsh said the Fed’s main concern remains price control. A rate move could ease market pressure rather than trigger further gains.
Dot plot may shift expectations
The Fed’s September dot plot, which Warsh declined to submit, could show additional hikes if participants adjust their forecasts. This would reinforce the likelihood of further tightening.
Further hikes likely through year end
CME FedWatch projects a 49.7% chance of two more 25‑basis‑point hikes by December, pushing the target range to 4%‑4.25%. A 28.9% probability exists for three hikes to 4.25%‑4.5%.
