Federal Reserve System — Policy Preview

United States — Federal Reserve

Decision due: 16 September, 14:00 EDT · Current federal funds target range: 3.50-3.75%

1. Executive summary

The United States Federal Reserve is expected to raise the federal funds target range by 25bp to 3.75-4.00% at the 16 September decision. The single most important driver is core PCE still 3.3 percent after more than five years above target, reinforced by the rise in energy and oil prices since July and Warsh's Jackson Hole test ("clearly and at sufficient speed… otherwise we have work to do"). Fed-funds futures price the hike at about 90-92 percent; 85 percent of economists in the latest Reuters poll are on the same call. The live question is hike versus hold in the vote. The new Summary of Economic Projections and dot plot are released with the 14:00 EDT package and cannot produce a hold at this meeting — they show whether the committee then validates follow-through. Futures imply about 60-65bp of cumulative tightening from the current effective rate through March: this hike plus roughly one and a half more, not three additional moves.

2. The call

Fed-funds futures price about a 90-92 percent chance of a 25bp rise to 3.75-4.00%; 85 percent of economists in the latest Reuters poll are on the same call. The July decision was a 9-3 hold, with Presidents Hammack, Kashkari and Logan dissenting in favour of an immediate 25bp hike. The base case is a 25bp hike at this meeting, though a close vote cannot be ruled out given differentiated views among participants. From today's effective rate, the curve prices roughly 60-65bp of cumulative tightening through March. The new SEP and dot plot drop with the statement and will show whether that path is validated — they are not an input to today's vote.

3. The committee

Lean labels summarise RoboMacro's read of each member's public communications over the past six months, from Hawkish to Dovish. A lean is assigned where recent remarks carry a monetary-policy stance, or where a recorded vote is a dissent, hike or cut: 19 of 19 members currently qualify (Warsh, Jefferson, Barr, Bowman, Cook, Powell, Waller, Hammack, Kashkari, Logan, Paulson, Williams, Barkin, Collins, Daly, Goolsbee, Musalem, Schmid, Venable). Where the bank's attributed minutes record a stance more recently than the speech record, the minutes take precedence — marked "(minutes)" (Waller, Paulson).

Kevin Warsh is now in his third meeting as Chair following the May leadership transition. The committee balance has shifted hawkish since the June unanimous hold, culminating in the three dissents at the July meeting. The speech record since the last decision is dominated by inflation concerns, with explicit openness to further tightening from Cook, Collins, Schmid, Hammack, Barr and Jefferson. Warsh’s own emphasis on price stability as the predominant focus, the level of core PCE, the rise in oil since July and Warsh's Jackson Hole test point to a committee that may act if the new projections do not show clear progress toward the 2% target.

4. Data since the last decision

No new release since the last decision for: Output gap (RoboMacro model estimate) — the committee sees the same print(s) it saw last time. Market rows are measured from the 29 Jul close — the last observation common to every market series on or before the last decision. Priors marked "revised" are the source's current vintage for that period, which differs from the figure as first published. The data since the last decision present a mixed inflation picture. Headline CPI held at 3.4%, held up by energy (about +16% year-over-year). Core CPI rose 0.3 percent on the month against a 0.2 percent consensus — that monthly beat is what moved the market; the 2.4 percent year-over-year print was in line and is the lowest since March 2021. The target gauge of core PCE remained stuck at 3.3% in July. The labour market is not loosening, with one strong payroll print in August beating expectations by 106k but with composition caveats from leisure and hospitality and local-government education, prior-month revisions that merely erased a July decline, and a three-month average near 70k; average hourly earnings surprised to the upside but wage growth eased to 3.1%; the unemployment rate was unchanged at 4.1%. Real GDP growth slowed and several sentiment gauges weakened, yet services PMI strengthened and the output gap the committee already had in July remains positive. WTI crude oil reached 101.89 on 14 September. The CPI–PCE gap and the energy contribution to the headline, the level of core PCE, and the recent oil rise are doing the decisive work; the labour market is not loosening and the recent payroll strength outweighs the softer activity prints in shaping the outlook for demand pressure over the next two to three quarters.

5. What the speeches say

Anna Paulson — August 2026 essay and CNBC interview as of 4 August 2026

the July hold 'was not a close call'

policy as mildly restrictive, and kept an 'open mind'

The speech record since the last decision shows repeated emphasis on inflation remaining above target for more than five years, with associated risks of entrenchment. Members including Barr, Cook, Collins, Schmid, Hammack, Jefferson, Warsh and Venable have highlighted the need for confidence that inflation is moving clearly toward the target or that further policy tightening may be required. Waller has judged that policy is only slightly restrictive and has conditioned support for a hike on inflation coming in hot, while urging to give disinflation a chance. Barkin floated the possibility that the Fed may need to raise rates further if inflation is embedded. Bowman’s two speeches contained no monetary-policy content. Paulson indicated that the July hold was not a close call, described policy as mildly restrictive and said she has an open mind. The most recent communications from Waller (3 September) and Barr (1 September) continue to stress upside inflation risks.

6. Scenarios

June SEP context The June 2026 Summary of Economic Projections already contained a 2026 hike. Median federal-funds rate 3.8% at end-2026, 3.6% at end-2027 and 3.4% at end-2028, against a current midpoint of 3.625%. Today's vote is hike versus hold. The September dots, released with the statement, then show whether the committee validates further tightening in 2026-27 or lifts the longer-run rate.

7. Into the meeting

The statement is likely to retain its shortened Warsh-era form while underlining that inflation remains well above target and that the risks to the inflation outlook are skewed to the upside. The Summary of Economic Projections and dot plot will be the primary vehicles for forward guidance; any upward shift in the median path for 2026 and 2027 or in the longer-run dot will be the decisive signal. Chair Warsh’s press conference will be scrutinised for language on the task-force reviews of the framework and communications, the extent to which recent oil and tariff effects are judged transitory, and whether the Committee still views the current stance as only slightly restrictive. After the decision the August core PCE on 30 September, the Q2 GDP final estimate and the August personal-spending data will be the most important releases; the FOMC minutes follow on 7 October. None of these can affect the September vote or the SEP submitted at it.

Full analysis on the RoboMacro site → /central-banks/FED