Federal Reserve signals potential rate hike as markets price 55% chance

The probability of a Federal Reserve rate hike next month just flipped from unlikely to coin-toss territory. Following hawkish comments from Fed Chair Kevin Warsh at the Jackson Hole Economic Policy Symposium, markets are now pricing in a 55.5% chance of a rate increase at the September 16 FOMC meeting. That’s a sharp jump from the 30-38% probability traders were assigning just before Warsh took the podium. What Warsh actually signaled Warsh, who became Fed Chair earlier in 2026, used his inaugural Jackson Hole address to strike a notably aggressive tone on inflation. The context matters: July 2026 CPI came in at 3.4%, well above the Fed’s 2% target. That target has now been missed for over 65 consecutive months. At the most recent FOMC meeting on July 28-29, the committee voted to hold the federal funds rate steady at 3.50%-3.75%. But the decision wasn’t unanimous. Three regional Fed presidents dissented, pushing for an outright rate hike. Warsh has also shown a clear preference for less detailed forward guidance, opting instead to discuss broader structural questions about the economy. Bond markets have already felt the difference, with yields swinging more aggressively around Fe...