White House turns up the pressure on Warsh’s central bank

Surprisingly healthy employment data has tipped expectations for a rate hike at the Federal Open Market Committee’s (FOMC) meeting higher this week, with interest rate traders now placing the likelihood at 58.4%.

According to CME’s FedWatch, nearly 60% of investors are betting on a 25bps hike to 3.75% to 4%, with the remainder of bettors suggesting the Kevin Warsh-led central bank will instead announce a hold.

The renewed call for a hike comes courtesy of a Bureau of Labor Statistics (BLS) report Friday, which showed that the U.S. economy added 162,000 jobs in August with the unemployment rate unchanged at 4.1%.

Meanwhile, inflation data, the other side of the Fed’s two-pronged mandate, isn’t behaving as helpfully. The BLS’s latest report, released in mid-August, showed the all-items index for the past 12 months sat at 3.4%—well ahead of the FOMC’s 2% target. The next Consumer Price Index report is due to be released on Friday, but with supply-side shocks like the Middle East conflict and tariffs still rumbling on, analysts expect the data to further prove the need for a hike at the next FOMC meeting, which will conclude Sept. 16.

Tim Smith, senior policy adviser at the Interfaith Center on Corporate Responsibility, whose members often file shareholder resolutions, said the move would create confusion because regulations are not uniform among states, such as how many shares are needed to bring ⁠a matter to a vote.

Under a new law in Republican-controlled Texas, for instance ⁠investors could need as much as $1 million worth of shares to file a resolution, compared with just $2,000 under a current SEC requirement.

“Across the investor community there will be a response to the questionable legal arguments he (Atkins) is making about the authority of the SEC,” Smith said.

Cooley law firm strategist Broc Romanek said the change could lead to more votes against corporate board members as shareholders’ options for expressing disapproval narrow.

“Votes against directors will be used more and more as other avenues ⁠are shut down,” Romanek said in a telephone interview.

In a separate regulatory notice, the SEC said it would “modernize” the proxy solicitation process, which governs shareholder communications. The agency spokesman said it aims “to reflect advancement in technology and current realities of ​shareholder communications.”

Macquarie’s David Doyle wrote in a Friday note: “While the timing remains uncertain, we move our baseline case for the first 25 bps hike to September [previously December]. We continue to anticipate a second 25 bps hike in 1Q27.”

Bank of America added it expects a hike next week with the U.S. macro team adding: “If August core [Personal Consumption Expenditures] prints at 0.24% m/m or higher, there is a good possibility we go into the September meeting with hike odds above 50%. In that scenario, a decision not to hike could raise questions about the Fed’s credibility, likely showing up in higher long-end yields.”

Yields moving higher, as they did after the last FOMC meeting in July, would likely undo the work that Treasury Secretary Scott Bessent has been actioning over the past few weeks with Treasury buybacks.