The market is pricing a 90 percent chance the Federal Reserve raises rates this week. That number comes from two headline prints: an August jobs report that beat expectations, and a CPI report that ran hot on the surface. Neither survives a look at what's underneath it. And neither number is the one that actually decides Wednesday's outcome.
The vote count does.
We don't argue with narrative here. We check it against the record and let the reader decide. So instead of predicting an outcome, here is what's True, what's Unknown, and what's False in the case for a hike.
True
The Federal Open Market Committee has 12 voting members: seven Governors, the New York Fed president as a permanent voter, and four regional Reserve Bank presidents on annual rotation. A hike requires seven votes.
This year's rotating bloc — the Dallas, Cleveland, Minneapolis, and Philadelphia Fed presidents — leans hawkish. That's four votes, not seven.
Governor Waller said publicly, before the data even printed, that he would support holding rates steady if disinflation continued. He specifically flagged one distorted, imputed price series as inflating the headline number. The data since has confirmed exactly what he described.
August's payroll report added 162,000 jobs — but 42,000 of that was public school teachers returning for the new school year, and 59,000 was food service hiring. Both are seasonal. Information-sector employment fell. Professional and business services were flat.
August core CPI came in at 2.4 percent year-over-year, the lowest reading since March 2021. Strip out the one volatile services category Waller flagged, and the core monthly print rounds to the same pace as July.
I Don't Know
- Whether the Fed chair's hawkish August remarks reflect a fixed position, or committee positioning ahead of a live vote — his public alignment with the Treasury Secretary's no-hike framing in the days after complicates a simple read.
- Whether the remaining Governors vote with the data Waller has already described, or split toward the hawkish bloc.
- What the Committee actually decides Wednesday.
False
"The jobs report blew past expectations." True of the headline. Not true of the composition — strip the seasonal hiring and the underlying labor market added next to nothing.
"CPI confirms an inflation problem." True of the headline. Not true of the internals — the acceleration traces to one volatile line item, not a broad repricing.
That this is a settled hawkish committee. The vote math doesn't support it without several Governors breaking from the reasoning one of their own colleagues has already laid out in public, on the record, ahead of the data.
The Gap
Ninety percent of the market is positioned for a hike, built on two headlines. The people who actually cast the votes have been telling you, in public remarks and in committee arithmetic, what they'd need to see before hiking — and it has not shown up.
That gap between what's priced and what the composition of the last two data prints shows is the story. Not the headline. Not the hike. The gap.
We don't tell you what happens Wednesday. We show you the math and let the vote count speak for itself.
Mark Berube, ChFC, CLU Co-Founder, Quantum Capital
Ike Fontaine Co-Founder, Quantum Capital
Disclosures
This material is provided by Patriot Advisory Group LLC, dba Quantum Capital ("the Firm"), for general informational and educational purposes only. It does not constitute investment, legal, or tax advice, and it is not an offer or solicitation to buy or sell any security. Nothing herein should be construed as a recommendation to take any specific action.
The information presented is derived from sources believed to be reliable, including public government data releases and public statements by Federal Reserve officials, but the Firm makes no representation as to its accuracy or completeness. Any views, interpretations, or analysis expressed are those of the authors as of the date of publication, are subject to change without notice, and do not account for any individual reader's financial situation, objectives, or risk tolerance.
Forward-looking statements, including any discussion of anticipated Federal Reserve action, are inherently uncertain and actual outcomes may differ materially. Past performance and prior data trends are not indicative of future results.
This communication is intended for both current clients and the general public and should not be relied upon as the sole basis for any investment decision. Readers should consult with a qualified financial, legal, or tax professional regarding their own circumstances before acting on any information contained herein.
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