Federal Reserve Chairman Kevin Warsh faces a delicate vote this week on the interest rate path, with futures pricing in a better than 92% probability of a quarter-point rate hike. The benchmark Fed funds rate currently stands at 3.50% to 3.75%, with markets also anticipating a follow-up hike in December at more than 75% probability. The July meeting saw a 9-3 vote in favor of holding rates, with three regional presidents dissenting, while August inflation came in at 3.4% headline and 2.4% core, well above the Fed’s 2% target. The outcome of the vote will reveal the extent of intellectual divisions within the committee between those who view inflation as temporary and those who fear it is becoming entrenched.
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