Warsh Speaks in Bangkok Before Fed Blackout With October Hike Odds Near 40% After 3.7% CPI

Since the Federal Reserve raised rates by a quarter point in September, the first increase since 2023, the question has been whether it does it again. The September inflation report, released Wednesday, Oct. 14, made that question harder to wave off.

Consumer prices rose 3.7% from a year earlier, up from 3.4% in August and above the 3.6% economists expected. Monthly inflation was 0.6%, with gasoline up 9.1% and energy up 5.2%, according to figures cited by Invezz. Shelter rose 0.4%.

What the numbers did to rate expectations

The CME Group's FedWatch tool priced an October hike at 41.5% at 12:20 p.m. ET on Oct. 14. The day before it was 22.1%. The Fed's target range is now 3.75% to 4.00%, so a second hike would move it to 4.00% to 4.25%.

Jefferies chief U.S. economist Thomas Simons said it is "hard to see how they could justify holding rates steady again in October based on the details of this report." He also noted that core goods prices rose 0.25% in September, the largest monthly gain since January 2025.

Nationwide chief economist Kathy Bostjancic pointed to the same pressure. "Inflation is running too hot compared to the Fed's 2% target, economic activity is buoyant," she wrote, adding that airline fares are up 22% from a year ago. Bank of America analysts said the broad-based inflation "strengthens the case for an October hike," and named "AI and Iran" as the two main sources of pressure.

The case for waiting until December

Not everyone sees October. UBS analyst Simon Penn wrote on Sept. 29, before the CPI release, that a hike on the eve of a midterm was "politically untenable" and that he expected December. RSM economist Joseph Brusuelas also expects 25 basis points in December and sees little sign of disinflation.

The election-calendar argument comes from analysts, not the Fed. The Fed says it does not factor the electoral calendar into policy. By 24/7 Wall St.'s review of decisions since 1990, the Fed has raised rates within seven days of an election once: 75 basis points on Nov. 2, 2022. The Oct. 28 decision falls six days before Election Day.

Some economists say the CPI report opens the door to October but does not force it. Their reasoning is that Fed officials have recently said they are in no hurry. Reuters reported on Oct. 3 that the Fed might skip October in favor of December.

Further tightening is widely expected either way. Capital Economics' Stephen Brown calls the core upside broad-based and forecasts two more quarter-point hikes. Cleveland Fed President Beth Hammack told Barron's on Oct. 12 that more tightness is needed, favoring smaller, more frequent moves. Polymarket's contract on 2026 hikes showed 66% for exactly two in total, which means one more after September.

Warsh's Bangkok appearance

Warsh is scheduled to be interviewed by IMF Managing Director Kristalina Georgieva at the IMF and World Bank annual meetings on Friday morning, Oct. 16, in Bangkok. That is after 11 p.m. Thursday in New York. Fed officials enter a blackout period Saturday that runs through the Oct. 27-28 meeting.

Warsh has said he will not use speeches to steer markets. He wants fewer signals ahead of meetings and more open debate in the room. "There is definitely a two-sided risk, which is exactly what Kevin Warsh wants," said Chris Hodge, U.S. head economist at Natixis CIB Americas. "He wants more live meetings where the market doesn't exactly know what the Fed is going to do."

The approach has its own friction. BigGo Finance reports that since the September hike, Fed officials have made more than 40 public appearances, and that Hammack, New York Fed President John Williams, Vice Chair Philip Jefferson and Governor Christopher Waller have publicly voiced reservations about the quiet-Fed approach, which could include scrapping the dot plot. Those appearances, it says, pulled down market bets on further tightening before the CPI report reversed them.

Warsh's own framing is blunt. "It has been a tax on the American people and businesses. We plan on getting rid of that tax," he said of inflation, calling for "a regime change in policy."

The politics

Voters are dissatisfied with President Trump's handling of the economy, polls show. Inflation hit as low as 2.3% four months into his term, then rose after the tariff wave that month. It reached 4.1% in May, after the Iran war that began in February disrupted energy supply. Trump has tried several policy levers to bring down gas and diesel prices, and none has yet moved prices meaningfully.

Treasury Secretary Scott Bessent said last week that inflation should move toward the Fed's 2% target once the Iran conflict ends and energy markets are "well supplied." The Daily Wire reports the Fed is expected to hold at its next meeting, which is at odds with futures pricing that sits near 40% for a hike.

Since Warsh took the job in May, the Fed has held rates or raised them. Another hike would run against the rate cuts Trump pushed for over the past years.

The next move comes Oct. 27-28, six days before voters go to the polls Nov. 3. The Fed has not said whether it will hike, and its officials go silent Saturday.