Fed decisions (Jul–Oct)

"The Fed may stand pat, I think there's a shot at that," Trump ally @StephenMoore tells @JMathieuReports and @kaileyleinz. He sees a 70% chance of a rate hike; markets are betting it's higher. The Fed decision is imminent. Trump has been calling for cuts.

"The Fed may stand pat, I think there's a shot at that," Trump ally @StephenMoore tells @JMathieuReports and @kaileyleinz. He sees a 70% chance of a rate hike; markets are betting it's higher. The Fed decision is imminent. Trump has been calling for cuts.

Head of Research at Equiti Group, Raed Al-Khadher: The probability of the Fed raising interest rates has reached 93%, and not raising them will lead to significant market turmoil. Not raising interest rates may not have a direct impact on the economy, amid anticipation of a new rate hike cycle or just a precautionary one. A decrease in tensions and a cessation of conflict will lead to a decline in oil prices and give the Fed room to cut interest rates to reach its targets. #ClosingBell #Arabic_Business @Nadine_bn @NaserElTibi

"We expect a unanimous vote for a hike on Wednesday: 2 or 3 implicit dissents via 3.625 year end dot, but no explicit dissents on the vote itself. We struggle to completely discount the risk that Warsh’s Jackson Hole speech was purely performative and he could in fact try to jam through a hold, but equally cannot fathom a world where he commits what would be construed as the policy error of all policy errors and holds rates. We have no position in the meeting, but for choice think the former is more likely given past precedent, and would rather rec from 23bps priced. Warsh’s characterization of how data influenced the decision to hike is the million dollar question. His blundered “in two words, ‘not much’” response during the July press conference resulted in the first leg of ct30’s ensuing meltdown; we expect a more calculated answer on Wednesday which acknowledges at least an implicit reaction function to subsequent data prints. We struggle to rationalize the argument against *continuing* a hiking cycle in advance of the midterms, but likewise see little asymmetry in paying the jump at 12.5 given our 3.875 dot forecast The 2027 dot is a close call between 3.875 and 3.625. More interesting will be the ’27 Core PCE forecast, and extent to which other submitters join Waller in incorporating methodological adjustments into their ex-ante forecasts; we don’t envy the communication task force having to explain the .04bp/month drag from portfolio mgmt. fee recalculation just as Warsh tries to minimize focus on the decimal place minutia." - Brian Bingham GSRates, Short Macro Trading

Throughout last year, US President Trump urged the Federal Reserve to cut interest rates. Now, investors expect his handpicked Fed chair to reverse course and begin raising rates this week. The rationale for this rate hike underscores how much the economic outlook has changed since Kevin Warsh took over the Fed in May.

The probability of a Fed rate hike has surged to over 85%, but Trump's handpicked rate cut could contradict his intention to lower rates.

The market estimates a 90% chance of a Fed rate hike this week. What other variables remain for the US stock market?

Goldman is particularly reluctant to change its call: • • "We do not see a strong economic case for raising the funds rate.... We suspect that some FOMC participants will agree with this, and for that reason we see the Fed’s decision as less clear-cut than market pricing implies." • • "But we suspect that most FOMC participants will worry about the potential market reaction to not delivering a hike that recent Fed communication has guided the market to now almost fully price. Chairman Warsh’s Jackson Hole speech led the market to expect a hike if the inflation news was imperfect, and while the CPI was not concerning, it was imperfect."

The Fed Might Raise Rates Sept 16. Fintech Lenders Built Their Guidance On A Falling Curve.. • Kevin Warsh has chaired the Federal Reserve since 22 May, and his first Jackson Hole speech on 28 August left the market pricing something no fintech lender modelled for 2026. PCE inflation, he said, was running at 3.7% over twelve months and 4.1% annualised over six, with unemployment at 4.1%. "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do." Futures now put the odds of a quarter-point increase at the 16 September meeting at around 58%, against zero for a cut. The last time the Fed raised rates was 26 July 2023. Consumer lenders spent the summer reporting the opposite tailwind. Affirm's fiscal fourth quarter, published 27 August, showed an average cost of funds of 5.8%, down 103 basis points from a year earlier, and management credited "favorable repricing across all funding channels". Upstart told investors in August that it had completed a $569 million securitisation at what it called the tightest spreads in three years. Klarna's second-quarter outlook, published 18 August, carries a sentence that reads differently after Jackson Hole: the guidance "assumes benchmark rates in line with current forward curves". Every one of those curves has since moved. The borrowers at the other end of the loans were already the weak point. The New York Fed's second-quarter household report, out 11 August, put the flow of card balances into serious delinquency at 6.97% and auto loans at 3.00%, with total household debt of $18.8 trillion. The Fed's own economists describe those rates as elevated and steady, which is the language of a problem that has stopped getting worse without getting better. On 18 August the SEC charged three former executives of Tricolor, the subprime auto lender whose collapse cost investors $1.9 billion, with pledging the same loans to multiple securitisations. That is the bottom of the consumer credit stack, and it was still selling bonds to investors a year ago. Put the two together and the exposure is specific. A lender funded through warehouse lines, forward-flow agreements and asset-backed securities borrows at a spread over a benchmark that resets. Affirm's $30 billion of funding capacity is a mix of exactly those channels. Upstart says the bank charter the OCC conditionally approved in July "does not change our strategy of funding loans primarily with third party capital". Both companies guided for a year of falling funding costs. If the Fed moves, the spread compression they reported in August becomes the high-water mark, and the 0% APR instalment loans that Affirm's merchants pay for, 13% of its volume last quarter, become more expensive to carry before any merchant fee is renegotiated. The lenders with deposits look different. SoFi's second-quarter release includes the number the rest of the sector would like to have: the average rate paid on its $45.5 billion of deposits was 156 basis points below what it paid on warehouse facilities, "which translates to approximately $712.6 million of annualized interest expense savings". Klarna funds 88% of its book with $11.7 billion of customer deposits gathered in Europe. Chime, which earns most of its revenue from interchange, raised guidance on 5 August. Deposits reprice slowly and with a lag the bank controls, while a warehouse line reprices on the next reset date. Markets have already started sorting on that basis. Between Warsh's speech and the close on 4 September, Affirm fell 6.6%, Upstart 7.9% and SoFi 5.0%, while Klarna, the one with a deposit base and a stock already down 64% from its IPO, rose 2.9%. On 1 September alone, the day the odds of a hike moved above even, Affirm lost 6%. There is a second-order problem that a hike would bring forward. The Dallas Fed published an analysis on 25 August of what happens to bank balance sheets when deposits become more rate-sensitive: a ten-point rise in deposit beta cuts banks' capacity to hold duration by about $700 billion in ten-year equivalents. The same mechanism applies to a neobank paying above 3% on savings, as Klarna now does with the US account it launched in June. Deposits gathered on rate are the first to leave when a competitor pays more, and a rising-rate environment is when competitors pay more. Two things cut against the argument. Funding costs have fallen through August, and the New York Fed says delinquency transitions are steady. The case rests on what the lenders promised for the next twelve months and on the curve they promised it against. Governor Christopher Waller said on 3 September that he would support holding rates if inflation kept improving, "but if inflation comes in hot, I would consider a rate hike". The August inflation print lands the week before the meeting and will decide it. What happens next is a repricing of guidance. If the Fed holds on 16 September, the sector gets a quarter of relief and the same question in December. If it hikes, expect the first revisions from the lenders that fund in the capital markets, and expect the ones with deposits to say so loudly. The European Central Bank, which raised rates in June for the first time in three years, meets on 10 September. Europe's neobanks will get their answer first.

Reuters Poll-U.S. Federal Reserve to Hold Fed Funds Rate at 3.50%-3.75% in September, Said 65 of 93 Economists (Versus 94 of 104 Economists in August Poll)

Bisent challenges the bond market, and Washington faces a 5.25% test. An unusual battle is brewing in the US bond market: The Treasury is preparing to expand its bond repurchase operations after the 30-year yield approached 5.25%, nearing its highest level since 2007. On the other hand, inflation data may push markets to strengthen bets on a Federal Reserve rate hike on September 16, after the probability of a 0.25 percentage point increase reached nearly 60%. If the Fed tries to raise rates while the Treasury tries to curb long-term yields, who will ultimately prevail: Washington or the bond market? @maykhadra_bn #Arabic_Business

Will the Fed raise interest rates this month? Experts say Trump's pressure to cut rates actually strengthens the possibility of a September rate hike.

Trump later wrote on Truth Social that the jobs data “far exceeded all expectations” and again called on the Federal Reserve to cut interest rates. He said the U.S. should have the lowest interest rates in the world and threatened that the country could stop trading with nations with which it runs trade deficits if the Fed does not lower rates. Following the stronger-than-expected jobs report, market expectations for a September rate hike increased further.

Fed's Waller Hints at September Rate Pause-If August Inflation Plays Along -- Barrons.com

Fed's Waller Hints at September Rate Pause-If August Inflation Plays Along -- Barrons.com

Fed's Waller Hints at September Rate Pause-If August Inflation Plays Along -- Barrons.com

Fed gov Chris Waller's posture hasn't fundamentally changed since July, but the tilt has, from worried and leaning toward tightening back then to tentatively encouraged and leaning toward holding today. • • It will come down to the August inflation readings. His reaction function for Sept 15-16 is explicit: • • Continued progress on 2% = hold. • • Hot August print = "I would consider a rate hike.” • • The key paragraph is here: “Recent data suggest we are finally seeing some signs of disinflation. If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting. But there continues to be considerable uncertainty about how military conflicts, trade policy, and artificial intelligence will affect prices and economic activity. If the incoming data for August show this improvement has been fleeting, then it may be appropriate to raise the policy rate when the FOMC meets on September 15 and 16.”

Hike Fears Return • • Flat week across BTC and equities. BTC open $77.7K, high $81.4K on Thursday, close $77.6K. Flat on the week. ETH lost 1.89% to $2.4K and total market cap held $2.6T. S&P and the Nasdaq barely moved. • Hike odds reversed. Polymarket went from 30% hike / 70% hold to 52% / 48% on Warsh's Jackson Hole keynote. FedWatch is more decisive at 62.6% / 37.4%. • The volatility breakout lasted a week. BVIV fell from 46.5 to 38.9, back to the 7th percentile of the past 12 months, through a hawkish Fed surprise. • ETFs saw $1.9B of inflows. BTC $924.5M, ETH $815.7M, SOL $142.7M, HYPE $56.8M. August is BTC's best month since October 2025 and its best August on record. • A Round Trip • BTC opened Monday at $77.7K, ran to a high of $81.4K on Thursday, and closed Sunday at $77.6K. Flat on the week. ETH lost 1.89% to $2.4K. Total crypto market cap finished at $2.6T. Last week's leaders dipped as well. XRP gave back 10.72%, HYPE printed a fresh all-time high at $86.73 and still closed down 2.89%. ZEC fell 2.19%. SOL was the only major to hold a gain, up 6.61% to $101 with a high of $110. • • Equities barely moved. The S&P 500 added 0.18% to 7,677 and the Nasdaq 100 gained 0.53%. Brent fell 4.36% from $93.68 to $89.59 and gold fell 3.89% to $4,458, the two largest moves of the week across everything we track. • A Key Meeting Defined the Week • Warsh Reprices September • Kevin Warsh's first Jackson Hole keynote as Chair ran half an hour on Friday morning with the markets deciphering his every word. OOn this summer's cooler inflation prints, he said they "do not tell me that underlying trends have meaningfully improved." He again declined to offer explicit guidance, but named PCE as the gauge he will act on, and called current financial conditions not restrictive. Core PCE landed Wednesday at plus 0.2% m/m and 3.3% y/y against 3.2% expected, unchanged from June, with headline at 3.7%. Q2 GDP's second estimate held at 1.5% with consumer spending revised up to 3.4% annualized, which supports the same argument Warsh made about conditions not being restrictive. • Polymarket's FOMC September market went from 30% hike / 70% hold to 52% / 48%. On FedWatch, the odds are more decisive with a 62.6% hike and 37.4% hold. Yields spiked as crypto, gold and tech stocks fell as expectations of a hike grew. • • Schwab Opens the Retail Channel • Schwab said on Thursday it will add SOL, AVAX and LINK to Schwab Crypto in the coming months at 75bp per trade. Schwab Crypto only opened BTC and ETH retail access in May. The firm holds more than $12T of client assets across 39.9M brokerage accounts, which makes this a potentially large distribution channel. Nothing is live yet and no date was given. • CLARITY Hits a New Low • Polymarket odds on CLARITY passing this year fell to 13%, back to the all-time low set after the August recess and half the 28% it spiked to the week prior. Cloture on the motion to proceed is eligible at 2:15pm ET on September 15, the same day the FOMC convenes, and it needs 60 votes. • • The blocker is no longer ethics language. The ICBA has been pushing for a total ban on stablecoin yield, citing its own estimate it would move $1.3T of deposits and cut community bank lending by $850B. That campaign already cost the bill two Republican votes in early August. What changed this week is that its CEO ruled out a compromise on Thursday, which closes the negotiated fix the September timeline depends on. • Volatility, Positioning and Leverage • Volatility Metrics • The volatility breakout we saw the week prior was short. After BVIV reached 46.5, it has dropped to 38.9, down 16%, and sits in the 7th percentile of all readings in the last 12 months. • Liquidations and OI • Aggregate futures open interest is $135B, down 2.3% against last issue's $137.5B. It held flat through the week and has unwound since Sunday's close. • The flush is happening now. 24-hour liquidations are $399.5M, up 521% from a muted Saturday, with $276.4M on the long side against $123.1M short across 98,988 accounts. Coinglass's aggregate long/short ratio is slightly short-tilted at 49.3% / 50.7%. The narrative froth has drained. Funding on trending tokens like ZEC and PUMP has come down to single digits annualized and in some cases flipped negative, meaning shorts are now paying to hold the coins that led the last two weeks. • ETF Flows Continue • BTC and ETH ETFs took $1.74B combined, a second consecutive week above $1.7B. The last back-to-back week of such magnitude was September 29 and October 6, 2025. • BTC: $924.5M. Four inflow days, then $201.9M out on Friday as Warsh spoke, the first outflow session in ten. Cumulative flows since launch stand at $54.70B. August sits at $3.32B, the best month since October 2025 and the best August on record. Year to date now sits at -$1.89B against -$4.74B two weeks ago. Two weeks erased 60% of the year's outflows. • ETH: $815.7M. 13 consecutive sessions of inflows, including $102.1M on Friday while BTC bled. Best week since September 29, 2025. Cumulative net flows hit $12.97B. August sits at $1.75B, the best month since August 2025, and year to date has flipped positive at $623M. ETH had 88% of BTC's inflows while being just roughly 19% of its market cap. • • Beyond BTC and ETH, SOL and HYPE ETFs had a breakout week. Solana ETFs saw $142.7M of net inflows, five times the prior week's $28.7M, with five inflow days and $56.1M on August 27 alone. Cumulative net inflows cross $1.3B. HYPE had $56.8M, against $3.8M the week before, for a total of $350M in cumulative net inflows. • Key Events for the Week Ahead • Tuesday, September 1 • US: ISM Manufacturing, JOLTS for July, construction spending, all 10am ET. • Europe: August flash CPI. • China: Caixin manufacturing PMI, 9:45am CST. • Wednesday, September 2 • US: ADP national employment, 8:15am ET. • Thursday, September 3 • US: ISM Services, initial jobless claims pulled forward for the holiday. • Friday, September 4 • US: August nonfarm payrolls, 8:30am ET.

Is there nearly a 60% chance of a Fed rate hike in September? Yerlan gives three reasons: the market is overvaluing it.

WARSH SPEECH PUTS SEPTEMBER HIKE BACK IN PLAY • • Markets sharply repriced the September Fed decision following Kevin Warsh’s Jackson Hole speech. • • The probability of the Fed holding rates dropped from 71% before the speech to 50%, while odds of a 25bp hike jumped from 30% to 49%. • • A rate cut remains virtually off the table at 1%. • • Warsh’s inflation-focused message has turned September into a near coin flip. •

Minutes from Wednesday's meeting showed that the number of Federal Reserve officials who supported raising interest rates last month actually exceeded the three who formally voted against it; other officials also hinted that they would support a rate hike if inflation failed to improve.

Prediction Markets Give the Fed 74% Odds of Standing Pat in September

Reuters Poll-U.S. Federal Reserve to Hold Fed Funds Rate at 3.50%-3.75% in September, Said 94 of 104 Economists (vs 95 of 104 Economists in July Poll)

US Money-Mkt Close – Rates fall as data gives Fed fodder to pause

US Money-Mkt Close – Rates fall as data gives Fed fodder to pause

US Money-Mkt Close – Rates fall as data gives Fed fodder to pause

TRADERS NO LONGER FULLY PRICE IN A FED RATE HIKE THIS YEAR • • Prediction markets now see a 70% chance the Fed holds rates steady in September, versus 29% odds of a 25bp hike. • • A 25bp cut is priced at just 2%. • • Markets are increasingly betting the Fed can remain on hold as inflation cools. •

TRADERS NO LONGER FULLY PRICE IN A FED RATE HIKE THIS YEAR • • Prediction markets now see a 70% chance the Fed holds rates steady in September, versus 29% odds of a 25bp hike. • • A 25bp cut is priced at just 2%. • • Markets are increasingly betting the Fed can remain on hold as inflation cools. •

TRADERS NO LONGER FULLY PRICE IN A FED RATE HIKE THIS YEAR • • Prediction markets now see a 70% chance the Fed holds rates steady in September, versus 29% odds of a 25bp hike. • • A 25bp cut is priced at just 2%. • • Markets are increasingly betting the Fed can remain on hold as inflation cools. •

US GOVTS – Treasuries bid extends as tame PPI, jobless claims give fodder to Sept Fed pause