Top 10 Reasons to Hike This Week

September 14, 2026   Odds of a hike hit 90% following the as expected inflation report. There has never been a time when odds were that high and the Fed failed to deliver.

Did the Fed interpret Friday’s CPI as overheated as the market did? Inflation is down from two months ago; I feel like I must be missing something. It’s almost like the market is bullying Warsh into a hike, daring him to defy it. 

Last Week This Morning

• 10T: 4.96%

• 2T: 4.63%

• SOFR: 3.62%

• Term SOFR: 3.81%

  • This started climbing as the market priced in the hike

FOMC This Week

Thank goodness the Fed is hiking this week. That should settle everything in the Strait of Hormuz.

My favorite part? If they don’t hike, the T10 will keep climbing. Bessent and his $6B/mo buyback program ain’t helping. Bessent said, “I am the house now,” but that’s not true. He can only throw a few hundred billion at it. In a normal time, that might help. But with the long end in revolt, it’s actually making matters worse.  

Only the Fed owns the printing presses. A statement from the Fed would have a much bigger effect on the long end because they actually are the house. They’ve proven they can throw trillions at it.

Here’s the gist of my convos with customers Friday after the CPI report came in as expected.

“CPI is 3.4%! Hike!”

Wasn’t it 4.2% a few months ago? Why weren’t you screaming then?

“Core CPI m/m was 0.3%! That annualizes at 3.6%!”

But the annual measure of Core CPI hit the lowest level in 5 years.

“Supercore m/m was up 0.51%!”

Yes, but more than half of that was one item: cell phone service. It remains to be seen how a 25bps hike will help bring down your cell phone bill next month.

"That labor market tho!”

But average hourly earnings are growing at the slowest pace since Covid.

“1-year forward inflation expectations are 3.6%!”

Yes, but aren’t they actually lower than last month? And they very rarely dip below 3%, so 3.6% isn’t as out of whack as it may sound.

“Inflation has been above target for 66 straight months!”

OK, you got me there. But are we sure the government’s data is truly accurate? Here’s CPI side by side with private/academic measures.

Government     3.40%          
Penn State        1.67%              
Truflation          2.28%

Warsh has repeatedly said he doesn’t want Fed policy to be dictated by a single report and he keeps referencing “underlying inflation.” He hasn’t defined that (I assume one of his task forces is working on it), but he has historically pointed at the trimmed mean as a better reflection of inflation. The trimmed mean has been 2.3% or 2.4% all year…not that far from 2%.

Can Warsh persuade a room full of peers…who he has attacked relentlessly over the last five years…to buy into his interpretation of inflation? Can he persuade at least 5 of them?

Obviously, I don’t think they should hike, but I also think they can get away with it right now. I think the T10 hitting 5% is a bigger factor in hiking than the CPI report. Warsh has said he wants to incorporate market feedback into the Fed decision making process. The market is giving him plenty of feedback.

I wonder if the market would be revolting with Powell at the helm? He’s been pretty dovish and I’m not sure he would be leading the charge for a hike right now. Would the T10 still be testing 5% absent a hike if Powell were at the podium? Would the other members have rallied around him had he asked, “What’s the harm in waiting one more meeting?” Would Trump have been better off this week with Powell at the helm? Irony, it seems, has a sense of humor.

Warsh is in a tough spot. If he dissents, he looks like a weak leader. If he votes to hike, he has to deal with Trump.

We also get the SEP/blue dots that show each Fed member’s anonymous forecast for rates, labor, and inflation. Warsh hates Fed forward guidance, but will also march up to the podium and talk for 45 minutes.

What will he say? Everyone will want to know whether it’s one and done. Three and done? Is Fed Funds going back to 5%? We have two more Fed meetings this year, 10/28 and 12/9. How is the Fed approaching those? Still wait and see?  

The market will be disappointed with no hike, but just as disappointed with a hike + a dovish Warsh.

Playing coy is wearing thin, with rates up 75bps since he took over as Fed chair. Warsh was hoping to pull off this silent act through year end until the various task forces had completed their work. The market took matters into its own hands and now he’s in a staring contest with the bond market.

It turns out that the absence of guidance is still guidance.  

Top 10 Reasons to Hike This Week

10. Inflation has been above target for over 5 years, and the labor market is hanging in there
9. So David Sacks can claim Kevin Warsh was planted by the woke leftist extremist socialists
8. Job market is ok, so if you are gonna hike, now is the time to do it
7. Those years post-Covid were too busy, I kind of like this slower pace of deals
6. Supply shock after supply shock has knock on effects that work their way through the system
5. Maybe it really is the best way to get Trump to stand down on Iran
4. So our least respected competitor can get another fancy car at your expense, “We'll have seven Ferraris lined up in the parking lot when rates go up.” (We make more when our clients lose)
3. To find out if this AI investment boom is a bubble
2. Core PCE had a 2 handle every month last year and a 3 handle every month this year
1. The Trump tweet eviscerating Warsh is gonna be epic