Fed Chair Warsh faces uncertain vote as markets anticipate rate hike

Federal Reserve Chair Kevin Warsh and the Federal Open Market Committee are set to decide on a near-certain 0.25 percentage-point increase in the federal funds rate at Wednesday's meeting, while the size of the voting margin remains uncertain. Futures markets show a greater than 92% chance of a hike this week and a more than 75% probability of another move in December, according to the CME Group's FedWatch gauge, as the benchmark rate sits at 3.50%-3.75%.

Former New York Fed president Bill Dudley told CNBC that doing nothing would "damage his credibility because it would basically be all talk, no action." Goldman Sachs economist David Mericle noted that the recent inflation rise is largely driven by one-time factors such as tariffs and an energy supply shock, but the firm has shifted its forecast to a hike because market expectations could compel the Fed to act.

The committee’s vote could hinge on several swing voters. Governor Christopher Waller, who advocated patience in early September, said the cost of waiting one meeting is low and that a single hike would not bring inflation to the 2% target. New York Fed President John Williams also favored a "wait-and-see" approach, while Governor Michael Barr expressed openness to a hike if temporary inflation persists.

Among the dissenters from the July meeting, regional presidents Lorie Logan, Beth Hammack and Neel Kashkari supported a hike two months ago. If their positions have not changed, at least four other members would need to shift from a hold to a hike for the vote to pass. Governors Lisa Cook and Philip Jefferson appear inclined toward action, whereas Philadelphia Fed President Anna Paulson and Chicago Fed President Austan Goolsbee have called for more patience.

Analysts expect the vote outcome to signal the committee’s internal split between those who view inflation as transitory and those who see it becoming entrenched. JPMorgan chief global strategist David Kelly warned that a majority vote for a hike could be presented as a united front, potentially leaving few or no dissenters. The post-meeting "dot plot" will reveal participants’ expectations for additional hikes this year and into 2027, with the first projection for 2029 also expected.

If the vote is close, attention will turn to Warsh’s press conference, where he will need to articulate the Fed’s stance. Dudley emphasized that the Fed must explain its economic thinking and follow up with decisive action.