The Federal Reserve held rates at 3.50–3.75% on July 29, 2026, in a 9–3 vote. Three members dissented in favour of a 25-basis-point hike — the thinnest majority for a hold in this rate cycle. The September 15–16 meeting was expected to confirm that hold. Then Warsh spoke at Jackson Hole.
Fed Chair Kevin Warsh’s Jackson Hole address on August 28 did not signal a specific rate move. It did something structurally more significant: it explicitly reasserted that the Federal Reserve is not constrained by market prices, and framed the September meeting as a moment to address “big questions about the monetary policy framework” — not a rate adjustment, but the framework itself. That framing collapsed the market consensus. Established
Before the speech: ~70% hold probability on CME FedWatch. After: 56% hike / 44% hold — within the margin of a coin flip. JP Morgan now expects a 25-basis-point hike as the base case. Kalshi prediction markets show 48% hike probability. The range of credible estimates spans the decision itself.
CME FedWatch · September 16 FOMC — Rate Decision Probability
Source: CME FedWatch Tool · Kalshi · JP Morgan Research · 28 August 2026
What Changed
Two drivers moved the probability. The first is energy inflation. Oil prices remain elevated as a direct consequence of the Hormuz conflict: supply shocks through the Gulf have kept energy costs structurally above pre-conflict levels since May, feeding into headline CPI and complicating the core PCE trajectory. The July PCE print — the last major data point before September 16 — confirmed that inflation remains above the 2% target. The disinflationary path that justified five consecutive holds is no longer unambiguous.
The second driver is credibility. Warsh’s explicit statement that the Fed is “not constrained by market prices” was read by market participants as a warning that the committee will not allow market expectations to determine its decision. Three dissenters in July already signalled that the hold majority was thin. A chair who declines to provide guidance and simultaneously asserts institutional independence from market pricing is a chair who has made a hold look less automatic and a hike look more plausible. Assessed
What September 16 Decides
The rate decision is now genuinely uncertain. But the dot plot matters regardless of outcome. September 16 publishes the first updated Summary of Economic Projections since June — including rate projections for 2026 and 2027. Even if the committee holds, a dot plot that shows a majority expecting at least one hike before year-end would reprice long-dated yields, strengthen the dollar, and tighten financial conditions without a rate move. The signal function of September 16 is larger than its rate function.
The Leadsman will publish a Purser analysis on September 16 evening following the FOMC press conference and dot plot release. The Ledger prediction on the September 16 rate decision will resolve that day.