Fed Chair Warsh Signals Likely Rate Hike Ahead of Sept. 16 FOMC Meeting

Key Points

• The release of today (Sept. 11) is the August inflation report by the U.S. Bureau of Labor Statistics.
• Fed Chair Kevin Warsh and his Federal Open Market Committee (FOMC) colleagues rely on the Personal Consumption Expenditures (PCE) price index rather than the Consumer Price Index (CPI) as their primary gauge.
• Sticky price pressure in Personal Consumption Expenditures (PCE), combined with entrenched Trumpflation, points to a heightened probability of a rate increase on Sept. 16.

Today, Sept. 11, represents a pivotal moment for Wall Street and its leading equity indices—the Dow Jones Industrial Average (DJINDICES:^DJI), S&P 500 (SNPINDEX:^GSPC), and Nasdaq Composite (NASDAQINDEX:^IXIC). Additionally, it commemorates the tragic anniversary of a significant event while marking the arrival of the August inflation data from the Bureau of Labor Statistics.

Driven in part by so-called “Trumpflation” (inflation directly tied to federal policies during President Donald Trump’s administration), current inflation remains well above the Federal Reserve’s long-term 2% target. May’s headline inflation, calculated via the Consumer Price Index (CPI), reached 4.2%, significantly propelled by elevated fuel prices.

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Fed Chair Kevin Warsh has pledged to achieve price stability. Image source: Official Federal Reserve Photo.

During the June and July periods, CPI recalibrated to 3.5% and 3.4% respectively, with crude oil prices influenced by uncertainties surrounding a potential U.S.-Iran peace agreement. While some investors might interpret this modest CPI retreat as evidence supporting Fed Chair Kevin Warsh and his FOMC colleagues’ intent to maintain current interest rates, there remain compelling reasons to suspect Warsh and his peers have already decided on the Sept. 16 FOMC rate decision.

Wall Street and Investors Missed a Major Signal at Jackson Hole

The FOMC’s policymakers are obligated to uphold the dual mandate of maximum employment and price stability, with the latter being considered the Federal Reserve’s foremost priority at present. The central tension lies in identifying appropriate economic indicators to assess cost‑of‑living trends and determine whether intervention is necessary.

Although Warsh and his colleagues examined CPI alongside other macroeconomic statistics in formulating their monetary stance, the Personal Consumption Expenditures (PCE) price index stands out as the benchmark against which inflation is most rigorously evaluated.

BREAKING: US July PCE inflation, the Fed’s preferred inflation metric, hits 3.7%, above expectations of 3.6%.

Core PCE inflation was 3.3%, the second highest reading since October 2024.

US inflation continues to run at nearly double the Fed’s 2.0% target.

Own assets or be left…

— The Kobeissi Letter (@KobeissiLetter) August 26, 2026

In his inaugural annual Jackson Hole address, Warsh declared:

The Fed’s price‑stability objective of two percent, as measured by the Personal Consumption Expenditures price index, is a firm, fixed target.

The Fed chair openly disclosed the central bank’s undisputed lead inflation measure, which had previously been announced three weeks earlier. While CPI has shown notable declines—primarily driven by reduced gasoline costs—the more comprehensive PCE has proven considerably more resilient, posting a trailing 12‑month inflation rate of 3.7% in both June and July.

While the Fed prioritizes the PCE over CPI because it incorporates consumer substitution effects when certain goods become overly expensive and captures spending across all sources (not just explicit consumer purchases), the PCE is presently somewhat overheating relative to CPI, increasing the likelihood that FOMC action will be taken in September.

Federal Reserve Chairman Kevin Warsh indicated that the central bank has not yet completed its battle against inflation, stating that financing conditions did not appear restrictive to him and that recent improved readings did not convince him that the downward trajectory was accelerating.

“I would be hard pressed to…”

— Nick Timiraos (@NickTimiraos) August 28, 2026

Furthermore, Warsh’s Jackson Hole remarks outlined a broad timeline for how the central bank intends to evaluate progress in curbing above‑average inflation. As Warsh explained,

“We must be confident that underlying inflation is moving toward our objective, clearly and at sufficient speed. Otherwise, we have work to do.”

This phrasing suggests that Warsh—and potentially other policymakers—have lost considerable patience with an inflation rate remaining stubbornly above the Fed’s 2% long‑term goal for 65 consecutive months (counting).

Given the persistent elevation of inflation and clear signs of entrenched “Trumpflation,” the Aug. 26 PCE results likely provided the twelve voting members with the decisive insights required to make a rate decision ahead of Sept. 16. Although the fact that inflation stays above target and signs of structural persistence do not guarantee the FOMC will hike rates the following week, bond markets are extending every reasonable doubt that Warsh and his colleagues are ready to act.

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