Rate Hike Bets Hit 87% as Trump's Rate Strategy Falls Short

Trump for months claimed Jerome Powell was the issue. Powell is no longer at the helm, yet interest rates remain unchanged. On Friday, the probability of a rate hike at the next Fed meeting stood at 86.9%.

That wager contradicts Trump's campaign platform. He had pushed for low borrowing costs and selected Kevin Warsh specifically to achieve that. Warsh has yet to make any rate cuts.

“As an investor, you have to ask yourself: President Trump effectively made rate CUTS a pre-condition for his next Fed Chair. Will Fed Chair Warsh actually raise interest rates in his first rate move since being appointed Fed Chair by President Trump?” analysts at the Kobeissi Letter posed.

Do markets overstate the likelihood of a rate increase? No Federal Open Market Committee chair has registered a dissenting vote since 1939.

Warsh Chosen by Trump to Deliver Lower Rates

Warsh was sworn in on May 22. Before that, Trump had repeatedly criticized Powell for being sluggish. However, Powell did reduce rates, with the committee enacting three cuts in late 2025, the last on December 10.

Warsh has not lowered rates at all; his June and July meetings both resulted in no change. According to the CME FedWatch Tool, another cut may not come at the next meeting either.

A September Fed rate hike is almost locked in now

85% chance the Fed hikes next week.
It's the right call.
The risks are growing that inflation remains entrenched (or keeps broadening). Fed Chair Warsh doesn't want to make the same mistake Powell did of waiting too long to…

— Heather Long (@byHeatherLong) September 11, 2026

Heather Long serves as chief economist at Navy Federal Credit Union. Trump had criticized Powell for being too slow to lower rates. Long believes Warsh is worried about the opposite scenario.

She argues that a rate increase might actually benefit lower-income Americans by reducing inflationary pressures.

In July, three Fed officials voted in favor of a rate increase. According to betting markets, those officials now have the odds on their side.

Trump continues to push for rates around 1%. Jeremy Siegel of the Wharton School asserts that only Trump's pressure and the midterm elections are restraining the Fed.

Friday Data Poses Challenges for Warsh

Core inflation, excluding food and energy, increased 0.3% in August, while economists had anticipated 0.2%. Gasoline prices rose 3.9% in just one month.

Fed Governor Christopher Waller had cautioned that a strong inflation reading would make a rate hike likely. UBS now forecasts two rate increases this year.

UBS CPI take:

"Warsh painted himself in a corner here. Well, we've gotten the hard language tough guy speech at Jackson Hole. His remarks were prepared and his messaging was intentional. Now, we've gotten the data – labor market print more robust, inflation still supported.…

— zerohedge (@zerohedge) September 11, 2026

The White House takes a different view. Kevin Hassett, head of the National Economic Council, notes that core inflation stands at 1.6% on a three-month basis—a shorter timeframe than the Fed applies.

Not all those opposing a rate increase are aligned with Trump. Daniel Lacalle, chief economist at Tressis, argues that a rate hike would conflict with the Fed's dual mandate.

The Fed has a dual mandate: Price stability and maximun employment.

A rate hike now goes against both.

✖️ It will do nothing to gas, diesel prices or shelter costs.
✖️ It will hurt job creation, investment and domestic production.

It would engineer a private sector recession.

— Daniel Lacalle Official Account (@dlacalle_IA) September 11, 2026

This debate occurs as the labor market shows improvement, though not sufficient. In August, 162,000 jobs were added, unemployment remained at 4.1%, and labor force participation increased.

“Do not confuse an energy-price shock with demand overheating. Hiking into a recovering job market would be a massive policy mistake,” Lacalle warned.

That argument has two implications. If energy prices were behind August's inflation, then no Fed chair could have delivered the 1% rate Trump wants.

Warsh might still reduce rates in the future, but his vote comes on Wednesday. The issue now is not whether Trump secured his preferred chair—Kevin Warsh—but whether Jerome Powell was ever the real impediment.

Bitcoin (BTC) and gold both dipped following the CPI data, but recovered quickly.