The consensus heading into September is that the Fed September rate hike decision hinges on two data releases, the 4 September jobs report and the 11 September CPI print, and that a weak number on either could hand the committee political cover to pause. That reading may be underweighting the inflation picture that already exists.
What the Breadth Data Says That the Headline Numbers Do Not
The headline figures are uncomfortable enough. According to NPR, the consumer price index shows prices have risen 3.4% over the twelve months ending in July, while the Fed’s preferred measure, the PCE index, puts inflation at 3.7% over the same period. But the breadth figure adds another layer the headline rate conceals.
In his Jackson Hole speech, Chair Kevin Warsh noted that 54% of the 199 individual components in the PCE basket showed price gains above 3% over the past 12 months, according to the Federal Reserve. That reading sits well below the post-pandemic peak of around 77%, but it remains substantially above the 32% that prevailed during the two decades before the pandemic. Price pressure, in other words, is not concentrated in a handful of volatile categories that can be argued away. It is spread across the basket.
As HousingWire reported, that breadth finding came in a speech already being read as hawkish. Before Warsh spoke at Jackson Hole on 28 August, investors put the odds of a September rate hike at roughly one in three. Afterwards, according to NPR, the probability rose above 50/50. The CME FedWatch tool subsequently placed the odds at 59.7%.
The PCE Timing Problem and Why the CPI Is Not a Clean Substitute
The popular narrative frames the September decision as a CPI call. The problem is that core CPI, currently projected at 2.38%, is the one measure that might support a pause. The Fed has spent decades anchoring its thinking to core PCE, not core CPI, and the projected core PCE reading of 3.40%, up from 3.34%, is moving in the wrong direction.
Here is the structural awkwardness: the FOMC meets on 16 September, but the August PCE report is not published until 30 September. The committee will be voting without its preferred data in hand. Switching to CPI as the operative metric precisely when CPI is the most dovish reading available would be a convenient reversal, and that is the sort of reversal that invites credibility questions.
The Cleveland Fed Inflation Nowcast projects month-over-month CPI at 0.36%, an annualised rate of 4.41%. The model, which updates every business day and draws on high-frequency data including oil spot prices and retail gasoline tracking, carries particular weight when a Nowcast is generated late in the target month, as a 30 August reading would. By that point, according to MishTalk, nearly all intra-month energy and consumer data have already been logged. Core CPI at a projected 0.20% month-over-month (2.43% annualised) remains above target even by the most favourable reading available.
The Political Trap That Actually Points Toward September, Not Away From It
Much of the coverage treats political pressure as a reason the Fed might pause. The logic runs the other way. Jim Bianco’s tracking model puts the FOMC in a 5-5 gridlock, with former Chair Jay Powell as the deciding vote. Powell has never dissented against a sitting chair, and the institutional incentive to project cohesion under newly installed leadership is substantial. If Warsh pushes for a hike and the jobs report shows basic stability, historical precedent suggests Powell falls into line.
The mid-term election, less than two months away, further complicates delay rather than enabling it. If the Fed skips September and August and September PCE prints run hot, Warsh faces a binary: hike six days before polling day or freeze policy. Hiking that close to the election triggers an obvious political firestorm. Freezing policy with hot inflation data on the table would look like a partisan accommodation, precisely the appearance the Fed’s institutional independence argument cannot afford. There is no November meeting, meaning delay pushes necessary tightening into December, by which point inflation will have been left to run for a full additional quarter.
The CME FedWatch cumulative probability for the October 28 meeting already stands at 71.3%, meaning the market is not debating whether a hike is coming. It is debating the date. September is the cleanest window, and the breadth of inflation across the PCE basket makes the data case harder to dismiss than the headline rate alone suggests.
