#美联储即将公布利率决定 #Gate广场中秋团圆局 September FOMC Meeting Preview: How Will the Rate-Hike Script Unfold?

The September FOMC decision will be announced at 2 a.m. Beijing time on Thursday. Against the backdrop of U.S. PPI and CPI both coming in above expectations last week and oil prices breaking above $100, the market has already written a predetermined script for this meeting—an interest-rate hike: FedWatch puts the probability of a hike as high as 92%, and even Goldman Sachs, which had previously insisted that there would be no hike, has changed its stance and acknowledged that a hike is imminent.
If the Fed really does hike rates in September, it will be the first time since 1958 that the Fed has begun a rate-hike cycle within three months of a midterm election.
So will the Fed really hike rates at this meeting? If it does, how long will this rate-hike cycle last?

Will there be a hike? There is an overwhelming probability that there will be one. Inflation has now become the Fed’s core concern, and hiking rates to combat inflation has become a realistic option. Since the July FOMC meeting, developments have made a hike increasingly likely:
First, hawkish views have a clear advantage within the Fed. According to my statistics, excluding Fed Chair Warsh, fifteen Fed officials have publicly expressed their views since the July FOMC meeting, eight of whom have voting rights: five support or lean toward supporting a rate hike, namely the three regional Fed presidents who voted against the decision at the July meeting, along with Fed Governors Barr and Cook. The only clearly dovish voter leaning toward keeping rates unchanged is New York Fed President Williams. Philadelphia Fed President Paulson has maintained a neutral stance and has shown no policy inclination toward either hiking rates or keeping them unchanged. The most interesting case is Fed Governor Waller. Although Waller appears dovish, he has explicitly said that if inflation shows signs of accelerating, he will support a rate hike.
The economic data released after Waller’s remarks may push him toward supporting a hike: first, the August jobs report disproved the narrative of weakening employment in the July report; then PPI and CPI both came in above expectations, indicating that inflation risks are heating up rather than cooling down. The balance of the data has tilted hawkish. Under ideal circumstances, the hawks could already have six votes, reaching half of the FOMC’s twelve votes.
More importantly, at the central bank’s annual meeting in late August, Warsh rebuilt the Fed’s and his own inflation-fighting credibility through forceful hawkish remarks. After inflation data exceeded expectations, the performance of various assets showed that the market believed Warsh would deliver on his anti-inflation pledge. Actions are more convincing than words. If Warsh merely talks without taking action, the little “credibility” he has painstakingly rebuilt will be lost again, and the market will consequently experience major volatility—hardly a good outcome for a Fed chair who has been in office for only four months. Therefore, for Warsh right now, hiking rates is the path of least resistance: internally, there will be very few dissenting votes, and there may even be none. Externally, the market will have greater confidence in Warsh’s determination to fight inflation, giving him more room to operate monetary policy in the future.
Of course, a rate hike is not without drawbacks—Trump will not be pleased. But Warsh may be able to ease his conflict with Trump through their personal relationship, whereas market distrust is an imminent danger.

How many more hikes? How much? How many times will rates be raised during this cycle, and how large will the increases be?
First, the possibility of stopping after just one hike is low. Historically, since the Fed began publishing its federal funds target range in 1994, there have been six rate-hike cycles, only one of which ended after a single hike—in March 1997. The remaining five cycles involved between six and seventeen hikes, with an average of 9.8 hikes.
So will this rate-hike cycle last as long as previous ones?
Very likely not.
On the one hand, although inflation has not yet entered a sustained downward trend, it has not accelerated out of control, while employment also has structural problems. The need for large and prolonged rate hikes is not high.
On the other hand, the timing of the current rate hikes is not late. Faced with the same inflation trend, earlier hikes generally mean fewer hikes, while later hikes generally mean more, because earlier hikes can better stabilize inflation expectations. As long as the data support them, the Fed will face little resistance to continuing to hike rates.
So how much will rates be raised in total? Tomorrow’s dot plot projections for the interest-rate paths in 2026 and 2027 will provide us with the first direct clues.

The “Rate-Hike Scare” of the 1958 Midterm Elections

In August 1958, less than three months before the midterm elections, the Fed began hiking rates by raising the discount rate. In that year’s midterm elections, the ruling Republican Party suffered a crushing defeat, while the Democrats won a sweeping victory and secured firm control of both chambers of Congress. Then-U.S. Vice President Nixon was deeply impressed by the defeat and blamed it on the Fed’s rate hikes. After successfully being elected president, Nixon therefore chose a compliant Fed chair—Burns. Burns ultimately opted for a more accommodative monetary policy, but the price was that America’s Great Inflation spiraled out of control. It was only after Volcker became Fed chair and adopted an aggressive tightening policy that inflation was effectively brought under control, earning Volcker the reputation of “The man who slew inflation.”
Will Warsh choose to become Burns or Volcker? The answer will be revealed in the early hours of the morning. Let us wait and see.