Fed Hike Odds Sit Near 60% as August Inflation Data Approaches

The August employment report showed the US economy adding 162,000 jobs, with the unemployment rate holding at 4.1%^1,2. Bureau of Labor Statistics data also showed the civilian labour force increasing by 683,000¹. Fortune described the print as surprisingly healthy and reported that Wall Street had moved to expect a hike².

Pricing followed the data. CME Group figures showed traders assigning a 58.4% probability to a rate increase, with the remaining 41.6% expecting no move³. CNBC put the market-implied chance at about 60%⁴, and CME FedWatch showed a 60% chance ahead of the decision on Sept. 16⁸.

Why it matters to investors

The Federal Reserve is not speaking with one voice. New York Fed President John Williams said the latest inflation data was encouraging and showed evidence that price pressures are slowing⁶. Fed Governor Christopher Waller said he would support holding rates steady if upcoming data showed inflation pressures continued to ease⁵.

The chair is on the other side of that argument. The divergence between Chair Kevin Warsh and Williams became impossible to ignore after Warsh’s August 28 Jackson Hole address⁷. UBS now forecasts two Fed rate hikes in 2026 following the strong jobs report⁵. Economist Claudia Sahm, the creator of the recession indicator that carries her name, called a hike appropriate policy³. For investors, the question is no longer how fast the Fed cuts but whether it moves the other way^2,3,5.

What to watch

The decision falls on Sept. 16⁸. Ahead of it, the August consumer price index is the release that market pricing hangs on, with the rate decision described as still hanging on inflation after the jobs report⁶. Gold was subdued as oil rose and investors waited for that inflation data⁴. Two officials have set an explicit condition on the outcome: Waller said he would support holding if upcoming data confirmed that inflation pressures were easing, and Williams has already called the latest reading encouraging^5,6.

Political pressure runs the other way. President Trump said he would stop trade with certain countries if the Fed does not lower interest rates⁸, and the White House has increased pressure on Warsh’s Fed even as Wall Street expects an increase². The gap between an administration demanding cuts and a market pricing a roughly 60% chance of a hike is unusually wide^2,4,8. A softer inflation print would give Williams and Waller the evidence they have said they are waiting for^5,6.