Strong August payrolls put a September Fed hike back in play

The Bureau of Labor Statistics reported that the US economy added 162,000 jobs in August^3,4. The figure landed against a consensus of roughly 56,000, a gap wide enough to revive talk of a Federal Reserve rate hike at the policy meeting on 15 to 16 September⁴. The unemployment rate held at 4.1%, and the BLS revised the June and July payroll figures upward by a combined 55,000 jobs⁵.

UBS responded by forecasting two US rate hikes in 2026, citing hawkish communication from Fed Chair Kevin Warsh’s Jackson Hole speech and rising inflation risks from supply bottlenecks⁶. Wall Street now expects a hike, while the White House has increased its pressure on Warsh’s Fed to move the other way³.

A central bank talking past itself

The move in expectations was not one-directional. Rate-hike bets fell on Thursday after Fed Governor Christopher Waller signalled that he would favour keeping interest rates unchanged if incoming data allowed¹⁰. Waller has urged policymakers to give disinflation a chance, explicitly lowering expectations for a September increase¹.

The gap runs to the top of the institution. Warsh’s speech has contrasted with the view set out by New York Fed President John Williams⁷, and that divergence became impossible to ignore after Warsh’s Jackson Hole address⁸. Warsh is separately urging markets to stop relying on central bank guidance and to interpret the economic data independently⁹.

Why it matters to investors

A rate rise rather than a cut would reprice the front end of the US curve and, through it, every asset benchmarked against it. The unusual feature here is not the direction of travel but the absence of a single official signal: a chair telling markets to read the data themselves⁹, a governor arguing for patience¹, and a New York Fed president whose framing differs from the chair’s⁷ leave positioning to rest on the incoming prints rather than on guidance.

Waller has said the next interest rate decision could hinge on the August CPI report². That places an unusual weight on a single release, with Wall Street braced for the test and rate-hike bets hanging in the balance¹⁰.

What to watch

The August CPI report is the immediate input, and Waller has framed the decision as hinging on it². Beyond that, watch whether Warsh and Williams narrow their public difference before the meeting^7,8, and whether the payroll revisions pattern continues after the upward adjustment to June and July⁵.