The probability of a Federal Reserve rate hike next month just flipped from unlikely to coin-toss territory. Following hawkish comments from Fed Chair Kevin Warsh at the Jackson Hole Economic Policy Symposium, markets are now pricing in a 55.5% chance of a rate increase at the September 16 FOMC meeting.
That’s a sharp jump from the 30-38% probability traders were assigning just before Warsh took the podium.
What Warsh actually signaled
Warsh, who became Fed Chair earlier in 2026, used his inaugural Jackson Hole address to strike a notably aggressive tone on inflation. The context matters: July 2026 CPI came in at 3.4%, well above the Fed’s 2% target. That target has now been missed for over 65 consecutive months.
At the most recent FOMC meeting on July 28-29, the committee voted to hold the federal funds rate steady at 3.50%-3.75%. But the decision wasn’t unanimous. Three regional Fed presidents dissented, pushing for an outright rate hike.
