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We expect the FOMC to hold rates steady this week, as futures markets also do, but with oil above $100, consumer prices up 3.7%, and producer prices up 6.3%, Chair Kevin Warsh’s press conference will be key to gauging whether the Fed still sees the energy disruption as temporary and markets still expect a rate hike in December.
What caught our eyes this week
Should we expect the unexpected?
We expect the Federal Open Market Committee (FOMC) to hold interest rates steady at this week’s meeting. So does the federal funds futures market, which currently puts the odds at 91%. This may be the clear base case, but Federal Reserve (Fed) Chair Kevin Warsh has shown a willingness to surprise the market in ways past FOMC chairs would have preferred to avoid. Based on recent speeches, we still see the majority of the FOMC in wait-and-see mode. But against a backdrop of oil prices still north of $100, consumer prices growing at 3.7% year over year and producer prices growing even faster at 6.3%, perhaps a surprise should not be that surprising. In the press conference, we’ll be looking for hints at how the committee is interpreting the ongoing energy disruption. Is it still just a temporary supply shock nearly nine months later? How long can we reasonably look through this without expecting meaningful pass-through to broader inflation pressures? Even if we get a pause, markets overwhelmingly expect another rate hike in December (which appears to be corroborated by the Fed’s most recent dot plot).
CHART OF THE WEEK: Cerity Partners, CME FedWatch as of 10/26/2026
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