Why Economists Mostly Back a Pause
In the Bloomberg survey, a majority called for no move at the Sept. 15-16 meeting and for policy to remain unchanged into late 2027. They point to cooling price pressures and the fact that the October gathering lands close to U.S. midterms as reasons to stay sidelined both this month and next.
The poll wrapped up before Friday's inflation report, and still only 13 of 48 expected an immediate increase. Two out of three respondents also anticipated little to no alteration to the Fed's statement if officials hold steady.
Half of those surveyed said the Fed would need "especially strong data" to alter rates given how near the Oct. meeting is to the Nov. 3 elections, while 43% said the calendar would not sway the decision. As Nomura's Ruchir Sharma put it, "The election calendar provides some additional support for our call for the Fed to remain on hold."
Markets, Data, and the Warsh Wildcard
Investors leaned the other way. Early Friday, market pricing implied about a 70% chance of a move next week, and those odds surged past 90% once the Bureau of Labor Statistics said August consumer prices rose more than expected.
Part of the tension: inflation sped up earlier this year on higher energy costs, tariffs, and AI-related investments, but has ebbed a bit lately. Fed officials are divided, with some pushing to nudge rates higher to corral inflation to 2%, and others betting the recent disinflation continues without more tightening. The economist crowd largely sides with the wait-and-see camp.
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Kevin Warsh added intrigue at Jackson Hole last month, saying inflation hadn't slowed meaningfully, which powered renewed bets on a hike. Many economists additionally view the October meeting as a difficult setting for major action, since it falls just days before the midterms.
Dissent Watch, Projections, and Risks
If rates are left unchanged this month, most economists expect the same three July dissenters to break ranks again: Cleveland Fed President Beth Hammack, Minneapolis' Neel Kashkari, and Dallas Fed chief Lorie Logan. If officials opt to hike, likely dissenters shift to Vice Chair for Supervision Michelle Bowman, New York Fed President John Williams, and Governor Christopher Waller.
Two-thirds of respondents foresee the Fed keeping its June economic forecasts and rate path largely intact. Economists expect officials to keep indicating one more increase before year end, then pencil in a quarter-point cut in each of the following three years. Projections for joblessness and underlying inflation are expected to dip, with unemployment at 4.2% and the core personal consumption expenditures index at 3.2%. Many see inflation risks tilted higher, while 52% describe unemployment risks as "roughly balanced."
What This Means For Your Money
The economist consensus lines up with patience on policy. Yelena Shulyatyeva, senior U.S. economist with the Conference Board, expects the Fed to hold steady in September, October, and December, while cautioning that a clear inflation re-acceleration could force the FOMC's hand: "If inflation data decisively points to acceleration, then the FOMC will be forced to act regardless of the timing regarding the mid-term elections."
For everyday investors, that means the next few inflation prints and the pre-election October meeting timing could be the swing factors for rates, bond yields, and stock moves, even if the Fed stays on hold this month.
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