FOMC Meeting Preview: Three Questions for Chairman Warsh

Federal Reserve, FOMC Key Points

• Fed Funds futures traders are pricing in 92% odds of an interest rate hike this week, so the market reaction will depend more on the statement, SEP, and press conference.
• Assuming the Fed delivers the expected hike, traders will want to know WHAT could prompt another hike, WHY they hiked this time, and HOW to interpret the dot plot.
• EUR/USD has carved out a bearish channel over the last four weeks, with potential for volatility in either direction based on the interpretation of the meeting.

When is the FOMC Meeting?

The September 2026 FOMC meeting will conclude on Wednesday, September 15 at 2:00 ET.

Fed Chairman Kevin Warsh’s press conference will begin at 2:30 ET.

What are the FOMC Interest Rate Expectations?

According to a Reuters poll, 86 out of 101 economists expect the Fed to raise interest rates to the 3.75-4.00% range.

Perhaps not surprisingly, Fed Funds futures traders are pricing in 92% odds of an interest rate hike this week per CME FedWatch:

Source: CME FedWatch

Looking out to December, traders are pricing in 30% odds of two 25bps rate hikes, with 100bps (1.00%) worth of interest rate increases expected over the next year.

FOMC Preview: The Monetary Policy Statement

The “less is more” era of Fed communication under Chairman Kevin Warsh is well and truly in full swing, with the July statement clocking in at just 167 words.

For traders, the most interesting part of the statement will be the vote, specifically how many of the twelve members (if any) vote to leave interest rates unchanged at the current level. If there are three or more dissents, or if Chairman Warsh himself dissents (unlikely), then even an immediate interest rate hike may be seen as a potential one-off “insurance hike,” rather than necessarily the start of a new rate hiking cycle. Conversely, a unanimous decision to raise rates makes another interest rate hike this year more likely.

FOMC Preview: The Summary of Economic Projections

Traders will also get their regular three-month update tothe Federal Reserve’s Summary of Economic Projections (SEP).

First and foremost, markets will scrutinize the central bank’s “dot plot” of interest rate expectations, with both the end-2026 and end-2027 median interest rate expected to rise above 4.0%. Any reading below 4.0% will be seen as dovish relative to expectations, likely weighing on the US dollar and bonds, with yields and stocks as the primary beneficiaries. Meanwhile, a median expectations for rates to rise and hold above 4% through the end of next year will be seen as a “hawkish hike” and the possible start of a sustained interest rate hiking cycle.

For the more traditional economic projections, readers will want to watch the 2027 Core PCE forecast. With the renewal of the conflict in the Middle East (and accompanying spike in energy prices), inflation in 2026 is all but certain to increase relative to the expectation in June, but traders will want to know whether the central bank believes the oil shock will bleed into 2027 as well. If the median inflation projection remains in the mid-2% range, it would suggest that the FOMC believes the energy shock remains temporary, whereas a jump into the upper-2% range would serve as an acknowledgement that inflation is a legitimate issue to be addressed, even stripping out food and energy and looking beyond this year.

FOMC Preview: Three Questions for Chairman Warsh’s Press Conference

Like an elementary student learning the “question words,” traders should watch for the answers to three questions:

1. WHAT would make you hike again?

Assuming the Committee raises rates as expected, Chairman Warsh’s press conference will still be worth monitoring closely. Warsh has explicitly moved away from Powell-style forward guidance, but he’ll inevitably get questions about whether the December FOMC meeting is “live” for another interest rate hike. He won’t want to answer that question, so expect a game of chicken with reporters and watch the degree to which he pushes back on the question to gauge how the market react.

2. WHY did the Committee raise interest rates

In addition, the way he characterizes the (expected) interest rate hike will be crucial. If Warsh tells a story about oil prices as the primary catalyst, the move may be seen as more benign and dovish. On the other hand, a focus on underlying inflation and second-round effects would hint at the potential for more interest rate hikes, even if oil prices pull back in the coming months.

3. HOW should we interpret the dot plot?

Finally, some tension between Warsh’s anti-forward guidance ethos and the existence of the “dot plot” appears inevitable. If Warsh demurs on providing any guidance for the rest of the year, but the median FOMC official projects another one in the dot plot, traders will have to decide whether to trust the majority of the committee or the new Chairman.

US Dollar Technical Analysis – EUR/USD 4-Hour Chart

Source: StoneX, TradingView

Turning our attention to the charts, the world’s most widely-traded currency pair has carved out a bearish channel over the last four weeks. A relatively dovish, noncommittal takeaway from the Fed could boost the pair back toward the top of that channel at 1.1600 even if the central bank delivers an immediate increase, whereas a strong “hawkish hike” interpretation could have EUR/USD testing 1.1500 support in short order as traders price in relatively aggressive hikes in the coming months.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX