Goldman Sachs now expects the Federal Reserve to raise rates by 25 basis points at its September 2026 policy meeting, and the shift says plenty about who gets to feel the pain when the financial machinery starts grinding. Traders were pricing in about an 86.5% chance of a hike at the Fed meeting slated for Tuesday and Wednesday, while CNBC put the odds at 86.7% based on 30-day fed funds futures trading at the Chicago Mercantile Exchange. The people at the bottom don’t get to vote on any of this. They get the bill.
August inflation data helped push the whole thing along. Consumer prices rose 0.4% on a seasonally adjusted basis last month, putting the 12-month increase at 3.4%, according to the Bureau of Labor Statistics. Both readings matched the Dow Jones consensus, but they stayed far above the Federal Reserve’s 2% inflation goal. CNBC said the core inflation measure posted its largest uptick in four months, and Reuters said hot inflation data bolstered bets on a rate hike later this week.
Who Pays for the Rate Game
Gold prices edged lower as those expectations firmed. Reuters said gold slipped as an oil rally fanned rate-hike bets ahead of the Fed meeting, while Bloomberg said gold edged lower as hot U.S. inflation bolstered those bets. Reuters also said gold was near around $4,340 an ounce. The move came as the 10-year U.S. Treasury yield climbed toward 5%, a level CNBC said it was closing in on ahead of the Fed’s rates decision.
CNBC said the 10-year Treasury yield fell 1 basis point to 4.968% as of 2:09 a.m. ET on Monday after touching 4.992% on Friday, its highest level since October 2023. The 2-year Treasury note yield, which is most sensitive to short-term Federal Reserve policy, fell 3 basis points to 4.611% after reaching its highest level since July 2024 last week. The 30-year Treasury bond yield was last little changed at 5.359%. CNBC said the 10-year yield influences mortgages, auto loans and credit card debt, and that it is a key benchmark for borrowing costs and for valuing stocks and other financial assets.
That’s the hierarchy in plain sight. A handful of officials, traders, and market strategists move the levers, and ordinary people face the downstream costs through debt, housing, and credit. CNBC said the latest rise in yields stemmed partly from a supply-demand imbalance as heavy Treasury and corporate issuance competed for investor capital. Jason Ware, chief investment officer at Albion Financial Group, said he did not expect markets to break simply because the 10-year moved above 5%. He said higher yields are not necessarily bearish if they come with healthy growth, and he pointed to a resilient economy and steady core inflation. Niall O'Sullivan, chief investment officer at Marsh Investments, said many of the companies driving the equity rally are not especially sensitive to higher rates and that heavy capital expenditure supports strong economic growth.
What the Apparatus Calls Stability
CNBC said large federal deficits, heavy debt issuance and sticky inflation have contributed to a rising term premium, while oil’s return above $100 a barrel has added another source of price pressure. Treasury Secretary Scott Bessent has sought to contain pressure at the long end, including through an expanded buyback program, but BMO Capital Markets strategists said a more active buyback program could help limit selling pressure while failing to address the fundamental drivers of upward pressure on 10- and 30-year yields. The language is tidy. The reality is messier. The state can buy and sell, soothe and signal, but it can’t paper over the pressures it keeps generating.
CNBC also said George Awad, principal at Gibraltar Capital, has highlighted the large amount of leveraged hedge-fund exposure underpinning the Treasury market, including the cash-futures basis trade, and warned that a jump in funding costs, margin requirements or volatility could force leveraged investors to unwind positions simultaneously and amplify a selloff. That’s the kind of fragility built into a system that rewards leverage until it snaps.
USA Today said the political backdrop is also in play. The paper reported that when Kevin Warsh was sworn into office at a White House ceremony in May, President Donald Trump praised his hand-picked Federal Reserve chairman and encouraged him to be “totally independent.” Trump said, “Just do your own thing.” USA Today said that latitude will be tested this week as the Fed faces mounting pressure to hike interest rates to tame elevated inflation. It said Friday’s consumer-price report showed core inflation grew at a hotter-than-expected pace in August, pushing investors’ expectations for a rate increase at the Fed’s Sept. 15-16 meeting above 85% in futures markets.
Trump has repeatedly pressed the central bank to slash rates, recently threatened to escalate his trade wars if policy isn’t eased, and repeated on Sunday that U.S. borrowing costs should be the lowest in the world. Asked if he expected the central bank to raise rates at its upcoming meeting, Trump said: “I don’t know.” The paper said the push for looser policy is intensified by political angst inside the White House ahead of midterm elections, with polls showing growing voter dissatisfaction over the rising cost of living. It said lower rates could give Trump cover to signal economic relief was on the way and shift blame away from the administration.
Maurice Obstfeld, senior fellow at the Peterson Institute for International Economics and former chief economist at the International Monetary Fund, said: “They really are in a no-win situation where they incur the president’s wrath or diminish their credibility in the markets, with consequences for inflation that are probably more severe down the road.” He added: “I don’t think Warsh wants to go down as the Fed chairman who buckled to administration pressure when the Fed’s mandate was at stake.”
USA Today said one White House official offered mixed signals after the inflation report. On Friday, National Economic Council Director Kevin Hassett told Bloomberg TV that Trump still wanted rates to go down and, if the Fed hiked, “The president will have something to say about it.” On Sunday, Hassett said, “If it’s a rate hike, then the president - I’m sure he’s not going to be super happy about it, but he will defend the independence of Kevin Warsh above all,” on Fox News Sunday.
The paper said Trump’s first Fed chair, Jerome Powell, was sworn into office in early February 2018 and was publicly criticized by Trump by July of that year for raising rates, with years of unprecedented attacks following. It said Warsh, by contrast, has spoken informally with Trump multiple times since taking office, and some Fed watchers believe he could soothe Trump by relying on his personal rapport with the president. Michael Redmond, US economist at consulting firm Energy Aspects, said: “He can flatter the president on the phone and listen to him and hear him out. Maybe there isn’t such a squeeze on Warsh.”
USA Today also said Trump has tried, in a bid blocked by the Supreme Court, to fire Fed Governor Lisa Cook, and that his Justice Department pursued a criminal investigation into Powell over allegations of fraud related to the reconstruction of the Fed’s headquarters. The probe was dropped after lawmakers from both parties objected and a federal judge decribed it as an abuse of power. Heather Long, chief economist at Navy Federal Credit Union, said: “Warsh can’t win politically right now. If he hikes, he’s going to get a tweet, and if he holds steady, he’s going to get backlash” from markets.
USA Today said major Wall Street firms including TD Bank and JPMorgan Chase & Co. quickly revised their calls after Friday’s inflation report in anticipation of a rate increase this week. It also quoted Bloomberg economics saying: “The unfiltered market signal is clear: Investors want and expect the FOMC to hike. If the Fed does not hike, Warsh will lose credibility in the eyes of market participants.”
Patrick Harker, a former president of the Philadelphia Fed now at the Wharton School at the University of Pennsylvania, said a rate hike could, counterintuitively, aid the administration’s broader economic goals by easing worries over inflation. He said higher inflation expectations can drive up the yields on longer-dated Treasuries, making mortgages and corporate borrowing more costly. Harker said: “By raising rates, that signals that the Fed’s on the job. That might help with what the administration is trying to do, not hurt it.”
USA Today said the yield on the 30-year U.S. Treasury bond rose on July 29 when the Fed left rates unchanged and Warsh failed to explain the move to investors’ satisfaction. It said the policy committee Warsh inherited in May is keen to preserve the Fed’s independence, and that instinct for institutional defense was punctuated in May when Powell broke decades of precedent by staying on as a governor at the conclusion of his tenure as chair, blocking Trump from filling his seat. The paper said three policymakers dissented in favor of a rate hike at their July meeting, and that after the most recent data, an attempt by Warsh to forestall a rate increase could damage his standing among colleagues he’s hoping to lead.
Trump, speaking in January days before picking Warsh, said: “They’re saying everything I want to hear, and then they get the job. They get the job, and all of a sudden, ‘Let’s raise rates a little bit.’”