Kevin Warsh’s more hawkish tone at Jackson Hole has reinforced the case for a rate hike in September. August’s Consumer Price Index also confirmed that inflationary pressures are proving persistent, with core inflation (excluding food and energy) up 0.3% over the month.
Our expectations:
- Against this backdrop, a majority of the Federal open Market Committee (FOMC) is expected to raise the target range for the federal funds rate by 25 basis points, to 3.75% - 4.00 %.
- The key issue at this meeting will be the future path of rates, with the updated Summary of Economic projections (SEP) and dot plot; Kevin Warsh having abstained from submitting a projection in the previous SEP. Financial markets, for their part, are pricing in one further hike by year-end, followed by one or two more in 2027.
In conclusion:
In a resilient economy, with a labor market close to full employment and financial conditions that are not restrictive, leaving rates unchanged in September would risk allowing inflation to become more entrenched and would call into question the consistency of the message Warsh delivered at Jackson Hole. Long-term yields could then rise beyond already elevated levels, and the dollar weaken, as it did in July.
Source: Bloomberg, figures as at end-August 2026.
Completed 14/09/2026. This commentary is provided for information purposes only. The opinions expressed by Crédit Mutuel Asset Management are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. The information contained in this publication is based on sources we believe to be reliable. However, we do not guarantee its accuracy, completeness, validity, or relevance. Published by La Française Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. Crédit Mutuel Asset Management: 128 Boulevard Raspail, 75006 Paris is an asset management company approved by the Autorité des marchés financiers under n° GP 97 138 and registered with ORIAS (www.orias.fr) under no. 25003045 since 11/04/2025. Public Limited Company (Société Anonyme) with share capital of €3,871,680, RCS Paris n° 388 555 021, Crédit Mutuel Asset Management is a subsidiary of Groupe La Française, the asset management holding company of Crédit Mutuel Alliance Fédérale.
