Natixis: FOMC interest rate decision may see renewed dissent, providing clues for December policy.
2026-10-28 01:42:23
According to Natixis, the Federal Reserve is unlikely to raise interest rates unexpectedly at its Wednesday meeting, but the three dissenting members who appeared at the July meeting may again vote against the rate hike; Chairman Warsh's press conference will also reveal the Fed's policy focus for the remainder of 2026. 
October FOMC Meeting Expectations: Rates to Remain Unchanged, Hawkish Dissidents May Reappear In their forward-looking report to the Federal Open Market Committee (FOMC), Natixis economists Christopher Hodge and Celine Ake stated that the monetary policy signals from Fed officials are clearly divergent. Collins, Paulson, and Hammark favor further rate hikes; Jefferson, Williams, and Waller, after the last rate hike, advocated a wait-and-see approach; while Fed Chairman Warsh has maintained a neutral stance. "The Fed raised rates for the first time in three years in September, and we expect that when it announces its policy decision on Wednesday, it will keep the policy rate ceiling unchanged at 4.0%," the two economists said. "The three hawkish dissidents from the July meeting—Regional Fed Presidents Logan, Hammark, and Kashkari—are likely to vote against a 25 basis point rate hike again." The economists indicated that the possibility of Warsh pushing for a surprise rate hike cannot be ruled out, but the probability of this scenario is very low. "During the interval between the two meetings, US Treasury yields fluctuated, and the technology and artificial intelligence sectors showed weakness, reducing the urgency for further tightening of financial conditions." Meanwhile, "avoiding sudden rate hikes also helps the Fed circumvent criticism from the White House." Focusing on Warsh's press conference: Downplaying monthly data, financial conditions remain a core consideration. Regarding Warsh's press conference, Hodge and Ake focused on signals regarding his policy priorities. "The press conference is expected to ask about the latest Consumer Price Index (CPI) report. Warsh will likely respond that the committee values data trends more than single-month readings. This statement will give the FOMC room to ignore monthly data fluctuations." "We also expect Warsh to mention financial conditions again. Although credit spreads, mortgage rates, yields, and market volatility have all changed recently, as long as financial conditions do not shift towards easing, discussing financial conditions does not indicate a dovish policy stance, but rather reflects the Fed's facing two-way risks." The two economists also predicted that this press conference will remain short, continuing the style of the September press conference, without a follow-up question session or in-depth explanation of the committee and chairman's policy thinking. "Previous communication errors, coupled with a deliberate reduction in information disclosure, mean that short and limited press conferences may become the norm under Warsh's tenure." Outlook: Inflation gradually cooling, another rate hike possible in December Looking ahead, Hodge and Ake believe the Fed's core focus remains on inflation trends, and inflation is expected to improve. "The September CPI data was unusually high and volatile, but we remain cautiously optimistic about the market outlook, although our confidence has weakened compared to before," the report stated. "Assuming that non-cyclical price pressures such as tariffs and energy price increases gradually subside, domestically driven inflation will continue to decline, and core inflation will decrease. Currently, consumer confidence is weak, and real wage growth has stagnated or even turned negative, making it difficult for demand to surge again, and the economy will struggle to maintain an expansion level above its potential growth rate." "According to our forecasts, slower economic growth will help lower inflation and will also make the Federal Reserve more cautious, avoiding excessive policy tightening," the report concluded. "Based on this, we predict that this rate hike cycle will only have one more rate hike remaining, to be implemented at the December policy meeting. However, this judgment is contingent on positive inflation data in the coming months and increased market concerns about the economic growth outlook."
October FOMC Meeting Expectations: Rates to Remain Unchanged, Hawkish Dissidents May Reappear In their forward-looking report to the Federal Open Market Committee (FOMC), Natixis economists Christopher Hodge and Celine Ake stated that the monetary policy signals from Fed officials are clearly divergent. Collins, Paulson, and Hammark favor further rate hikes; Jefferson, Williams, and Waller, after the last rate hike, advocated a wait-and-see approach; while Fed Chairman Warsh has maintained a neutral stance. "The Fed raised rates for the first time in three years in September, and we expect that when it announces its policy decision on Wednesday, it will keep the policy rate ceiling unchanged at 4.0%," the two economists said. "The three hawkish dissidents from the July meeting—Regional Fed Presidents Logan, Hammark, and Kashkari—are likely to vote against a 25 basis point rate hike again." The economists indicated that the possibility of Warsh pushing for a surprise rate hike cannot be ruled out, but the probability of this scenario is very low. "During the interval between the two meetings, US Treasury yields fluctuated, and the technology and artificial intelligence sectors showed weakness, reducing the urgency for further tightening of financial conditions." Meanwhile, "avoiding sudden rate hikes also helps the Fed circumvent criticism from the White House." Focusing on Warsh's press conference: Downplaying monthly data, financial conditions remain a core consideration. Regarding Warsh's press conference, Hodge and Ake focused on signals regarding his policy priorities. "The press conference is expected to ask about the latest Consumer Price Index (CPI) report. Warsh will likely respond that the committee values data trends more than single-month readings. This statement will give the FOMC room to ignore monthly data fluctuations." "We also expect Warsh to mention financial conditions again. Although credit spreads, mortgage rates, yields, and market volatility have all changed recently, as long as financial conditions do not shift towards easing, discussing financial conditions does not indicate a dovish policy stance, but rather reflects the Fed's facing two-way risks." The two economists also predicted that this press conference will remain short, continuing the style of the September press conference, without a follow-up question session or in-depth explanation of the committee and chairman's policy thinking. "Previous communication errors, coupled with a deliberate reduction in information disclosure, mean that short and limited press conferences may become the norm under Warsh's tenure." Outlook: Inflation gradually cooling, another rate hike possible in December Looking ahead, Hodge and Ake believe the Fed's core focus remains on inflation trends, and inflation is expected to improve. "The September CPI data was unusually high and volatile, but we remain cautiously optimistic about the market outlook, although our confidence has weakened compared to before," the report stated. "Assuming that non-cyclical price pressures such as tariffs and energy price increases gradually subside, domestically driven inflation will continue to decline, and core inflation will decrease. Currently, consumer confidence is weak, and real wage growth has stagnated or even turned negative, making it difficult for demand to surge again, and the economy will struggle to maintain an expansion level above its potential growth rate." "According to our forecasts, slower economic growth will help lower inflation and will also make the Federal Reserve more cautious, avoiding excessive policy tightening," the report concluded. "Based on this, we predict that this rate hike cycle will only have one more rate hike remaining, to be implemented at the December policy meeting. However, this judgment is contingent on positive inflation data in the coming months and increased market concerns about the economic growth outlook."
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