Fed hike odds jump after firmer CPI
After the August CPI printed a bit firmer than expected, almost all Fed watchers who had not been expecting a September hike before that data changed their call [C006][X009]. Goldman remained reluctant, arguing there was not a strong economic case for raising the funds rate and that the decision was less clear-cut than market pricing implied, while suspecting most FOMC participants would worry about the market reaction to not delivering a hike that recent Fed communication had guided the market to almost fully price [X012]. By later in the window, a broad list of banks — including JPMorgan, Bank of America, Goldman Sachs, Citi, Morgan Stanley, Wells Fargo, Barclays, Deutsche, Nomura, Piper Sandler, TD, UBS, RBC and HSBC — were reported as expecting Kevin Warsh and the Fed to raise rates next week [X176].
- Mechanism
- If the Fed hikes into firm inflation, short-rate expectations and the discount rate rise, pressuring long-duration equities and bonds.
- Wider market or sector impact
- A hawkish near-term Fed path raises the discount rate for equities and lifts refinancing risk for the large stock of maturing Treasury debt.
- Wider-impact evidence
- A firmer August CPI shifted the near-term policy path, with almost all previously non-hiking Fed watchers changing their call and major banks now expecting a hike next week.
- Countercase
- Goldman explicitly did not see a strong economic case for raising the funds rate and viewed the decision as less clear-cut than market pricing implied [X012].
- Next test
- The Fed decision next week and whether the hike is delivered as broadly expected [X176].
Entities US rates · US dollar · US equities · rate-sensitive sectors.
Inspect evidence · 4 records
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C006 · Market reportingObserved 12 September 2026
Almost all of the Fed watchers that had not been expecting a September hike before today changed their call after the August CPI printed a bit firmer than expected
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X009 · @NickTimiraosObserved 12 September 2026
Almost all of the Fed watchers that had not been expecting a September hike before today changed their call after the August CPI printed a bit firmer than expected https://t.co/aEBqUIeQm0
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X012 · @NickTimiraosObserved 12 September 2026
Goldman is particularly reluctant to change its call: "We do not see a strong economic case for raising the funds rate.... We suspect that some FOMC participants will agree with this, and for that reason we see the Fed’s decision as less clear-cut than market pricing implies." "But we suspect that most FOMC participants will worry about the potential market reaction to not delivering a hike that recent Fed communication has guided the market to now almost fully price. Chairman Warsh’s Jackson Hole speech led the market to expect a hike if the inflation news was imperfect, and while the CPI w
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X176 · @StockMKTNewzObserved 12 September 2026
ALL OF THESE BANKS THINK KEVIN WARSH AND THE US FED ARE GOING TO RAISE RATES NEXT WEEK - Jpmorgan - Bank of America - Goldman Sachs - Citi - Morgan Stanley - Wells Fargo - Barclays - Deutsche - Nomura - Piper Sandler - TD - UBS - RBC - HSBC https://t.co/MfnE7Fanec