Warsh Speech Shifts Fed Rate Hike Probabilities, Making September Decision Highly Uncertain

Federal Reserve Chairman Kevin Warsh appeared before the Senate Banking Committee on Capitol Hill in Washington on July 15, 2026.

Ken Cedeno | AFP | Getty Images

In a keynote address at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, Kevin Warsh signaled a renewed commitment to fighting inflation, reshaping market expectations for a September rate move.

Since Warsh’s remarks, odds on the prediction market Kalshi have risen to roughly 48% for a 25‑basis‑point rate hike in September, up from about 70% that the Fed would hold steady before the speech.

Fed funds futures traders now price a 56% probability of a quarter‑point increase in September according to the CME’s FedWatch gauge, while Polymarket traders assign a 49% chance to a rate rise.

Following the Fed’s July meeting, markets were leaning toward a September hike after three Federal Open Market Committee members dissented from the majority’s decision to hold rates steady, arguing that higher inflation warranted a rise.

Nevertheless, expectations for a September hike fell last month after a softer‑than‑expected jobs report showed U.S. payrolls contracting in July and inflation, though still above the Fed’s 2% target, showing signs of easing.

In his speech, Warsh addressed recent data but warned that the Federal Reserve would need additional evidence. “While this summer’s inflation readings were better than expected,” he noted, “they do not tell me that underlying trends have meaningfully improved.”

He added, “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job, our mandate and our charge to keep.”

The remarks sent short‑term yields higher, with the two‑year Treasury note reaching its highest level since late July, reflecting heightened expectations for a rate increase.

The Federal Reserve’s next policy meeting is scheduled for September 16.

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