Fed Watch – 9/11/2026

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So Federal Reserve is scheduled to meet next week. And we just got in late August inflation numbers in this morning as of this recording a few minutes ago. inflation came in for the month of August at three point four percent. So pretty much the same as July, core inflation, which is excluding food and energy at two point four percent. so a lot of, I would call it angst at this point if we’re going to have a rate hike, the Federal Reserve, if that’s what it’s going to come out of the meeting next week. And it’s really, I want to pause there, its kind of remarkable where we’re sitting here in September of twenty twenty six.

If we go back to early twenty twenty six. the markets were expecting up to three rate hikes for a total of seventy five basis points. Fast forward nine months to the fall back half of twenty twenty six. Markets are now expecting two rate hikes With a total of fifty basis points. That’s a one hundred and twenty five basis point swing in a matter of nine months. It’s pretty remarkable. I don’t want to sugarcoat it or try to downplay that, that this is where we’re at. I’m Michael Feuz I’m filling in for Connor, who’s been out in Montana giving the Elk an economic keynote and maybe probably addressing a supply shortage of elk meat in his freezer.

So moving back to what we’re expecting. US Federal Reserve. You know, Connor has been bold enough to make a prediction the last few fed watches for you all that he doesn’t expect. a rate hike. He’s been pretty bold about it. I’m going to take even a bigger risk than Connor, because we have a few days away from the Federal Reserve meeting, and in a matter of days, I could have pie on my face from a bad prediction. But I’m going to stick with Connor that at this point, I don’t expect a rate hike coming out of the meeting next week. So I’m going to put myself on the line with Connor, maybe even a little crazier than him. Let me address the other side on kind of why, we could get a rate hike next week. We got pretty positive job numbers in August.

So US jobs, we added one hundred and sixty two thousand for August. An additional fifty five thousand were upgraded for both June and July. that gives the Federal Reserve some wiggle room, right? They have a dual mandate, full employment, stable prices, two percent target rate with inflation. What is that? So now they can kind of ignore one side of their dual mandate and go after the other side of it. That two percent inflation. Kevin Warsh came out and specifically said he’s after price stability. And price stability is a very subjective term. Yes, we have that quantifiable objective two percent, but price stability is kind of a sentimental feeling among the populace and people right now. We don’t feel like we have price stability. So there’s certainly an excuse and some buffer for the Federal Reserve to raise hikes. Big reason I think we’re going to hold off, is it’s political season. We have midterm elections approaching. There’s political pressures.

Yes. The Federal Reserve is supposed to be independent. But they’re human beings. They’re friends with all these politicians. They don’t like having mean things said about them. So I think that’s pressures real. And they’ll hold on, they’ll hold off raising rates, the other side. the big question the Federal Reserve should be asking, and I’m sure they all listen to Fed Watch is very much what’s causing inflation right now. And the big drivers to that, and the subsequent question before we get into the drivers is would raising rates address those drivers? So the first part of that question what’s causing inflation? It’s accelerating CapEx spend in the AI sector. It’s energy prices due to the war in the Middle East. additionally, it’s the expanding money supply. We’re ramping up tariff policy as well. Uh those four primary drivers to inflation would not be addressed by raising the basis point a twenty five basis point increase next week.

On top of that, there are some risks. The Federal Reserve should be taken into consideration. I’m sure they are. Real incomes are generally declining when real incomes decline. Uh, That tells us that incomes are not keeping pace with inflation. So we have to understand that the consumer isn’t in a as strong a position. And also, there’s a risk that interest rate sensitive sectors of the economy. This time a rate hike could be disproportionately affected by a rate hike. So taking those things into consideration, the causes of what’s driving inflation at this point and the risks, uh, my opinion is they should hold off on raising rates. I think with the political pressures as well, I think they’re looking at exactly what I talked about as well. And I think that will get them to essentially hold rates where they’re at probably signals still some hawkish language when they do put out the minutes farther out into the future of what was said. Uh, and to be honest, the bond market is pretty much doing the job for the Federal Reserve.

Now, you know, yields are pricing higher, keeping interest rates elevated. Uh, you know, that’s certainly sending a signal to investors, entrepreneurs on, you know, where, where to allocate their capital. What decisions to delay making. So at this point, I think the Federal Reserve can hold off. My prediction is they will maybe in a few days I’ll be looking pretty silly, having recorded this on Friday morning, uh, right after CPI and inflation numbers came out. But with that, Connor will be back in seat, I’m sure next week. Uh, and so he can either correct everything I’ve said and what actually unfolded, or maybe I’ll look, you know, we’ll be continuing on with watching for when the next rate hike would occur, which would be closer towards the end of this calendar year. So with that, thanks for joining Fed Watch. I’m Michael Feuz, talk to you soon.