Finance

Will the Fed Raise Rates? The Odds Keep Changing Fast

Marcus SterlingPublished 3w ago5 min readBased on 13 sources
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Will the Fed Raise Rates? The Odds Keep Changing Fast
Photo by Adam Nir on Unsplash

The chance that the Federal Reserve will raise interest rates at its September 2026 meeting jumped to 57.5% after comments from Kevin Warsh, according to Reuters data published August 29, 2026 (Reuters). That's a big swing from just ten days earlier, when the odds had fallen to 30.6%.

A basis point is just one-hundredth of a percentage point. So when people talk about a 25 basis point hike, they mean a quarter of a percentage point. On a $300,000 mortgage, that adds roughly $750 a year in interest.

The path to 57.5% has been anything but smooth. Traders have been bouncing between different stories all summer:

  • June 8: Roughly 40% chance of a hike by October, per CME's FedWatch tool (Reuters).
  • July 28: Approximately 40% chance of a hike at the September meeting specifically (Reuters).
  • August 11: 50% probability, down from 58% a week earlier (Reuters).
  • August 17: Just 30.6%, down from 52.2% the prior week (Reuters).
  • August 26: 40.1% after US data releases (Reuters).
  • August 29: 57.5% in the wake of Warsh's remarks.

The Dollar Follows the Odds

When the Fed looks likely to raise rates, the dollar tends to get stronger. Higher rates mean better returns on dollar-based savings and investments, so more people want to hold dollars. On August 26, the dollar index rose 0.24% to 99.145, with the euro trading down 0.18% at $1.1653 (Reuters). The next day, August 27, the index edged up another 0.05% to 99.18 while the euro slipped to $1.1646 (Reuters).

Earlier in the month, when hike expectations were falling, the WSJ Dollar Index dropped 0.32% over a week to 96.12, and the Singapore dollar edged higher against the greenback (WSJ). A separate WSJ report from August 10 noted Treasury yields (the interest rate the US government pays to borrow money) and the dollar rising as markets saw nearly equal chances of a September hike or no change (WSJ).

The wider arc is visible further back. On May 18, the WSJ Dollar Index stood at 95.66, down 0.23% (WSJ). By July 28, the index had risen to around 101 before retreating (Reuters).

Japan's Central Bank Is Moving the Other Way

While the Fed debate has driven the dollar lately, the Bank of Japan has been moving in the opposite direction. As of July 30, traders were pricing in nearly a 90% chance of a rate increase at the coming BOJ meeting (WSJ). By August 26, the Japanese yen had risen as markets raised their expectations of the BOJ increasing rates in September (WSJ).

The yen's strength has been intermittent. On August 11, its boost from government intervention was already fading (Reuters). The broader picture is that one central bank may raise rates while another is already tightening, and that tug-of-war is complicating things for currency traders.

Gold Caught in the Middle

Gold prices rose on August 17, supported by a weaker dollar and fading Fed hike expectations (Reuters). That rally came when hike probabilities had dropped to 30.6%. With odds now at 57.5% and the dollar firming near an eight-day high, gold faces the opposite setup: higher interest rates and a stronger dollar, which together tend to push gold prices down.

What the Whipsaw Tells Us

The swing from 30.6% to 57.5% in under two weeks is not a story of new economic data alone. The August 26 data releases moved the odds from the low 30s to 40.1%. The jump to 57.5% came after Warsh spoke, suggesting his words carried more weight than the actual numbers.

The broader context here is that the real risk is how quickly this probability moved on a single person's comments rather than a meaningful change in the data. When pricing swings that fast on talk instead of evidence, it is fragile.

One technical note: the WSJ Dollar Index differs from the ICE-traded dollar index referenced in the Reuters reports. The two use different currency baskets and weightings, which partly explains why the WSJ figure of 96.12 and the Reuters figure of 99.145 don't match on near-concurrent dates. Readers comparing across sources should not treat these as the same measure.

Looking ahead, the September meeting will settle a debate that has ranged from 30.6% to 58% and back again over six weeks. Whether 57.5% proves right or just another false peak, the volatility itself is the clearest signal: the market does not have conviction on the Fed's next move, and is lurching between data and commentary trying to find one.

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