The Fed meets today on policy. Here’s the pre-FOMC market view.
The Fed Open Market Committee meets today to set policy.
Ahead of the meeting, market participants expect nearly two quarter-point rate hikes by the end of the year.
Looking out one more month to January, two full quarter-point hikes are priced in.
Spotlight December 2026
CME FedWatch December 2026 Rate Hike Odds
- No Change: 9.1 percent
- One Hike: 33.1 percent
- Two Hikes: 37.6 percent
- Three Hikes: 17.4 percent
- Four Hikes: 2.8 percent
- At Least One Hike: 90.9 percent
- Two or More Hikes: 57.8 percent
That adds up to a weighted average projection of 4.05 percent, approximately 1.7 quarter-point hikes compared to today’s range of 3.50 to 3.75 percent.
The Problem for Warsh
If the market continues to put upward pressure on rates but Warsh insists otherwise, it will take Quantitative Easing (QE) or other market manipulations to maintain the Fed’s target.
However, Warsh wants to eliminate forward guidance and shrink the Fed’s balance sheet. The latter will only be feasible if the market agrees with the Fed’s target.
And removing forward guidance eliminates one tool for Fed manipulation.
So today’s meeting will be interesting for what Warsh says or does not say about Quantitative Easing.
What Should Warsh Do?
Hike rates.
That is my position, not what I expect Warsh to do. The number of dissents will be interesting if the Fed does not hike.
Meanwhile money supply and credit growth is rampant.
For discussion, please see How Much Credit Growth Does It Take to Expand Real GDP?
