September Fed hike odds hit 64% as Truflation CEO calls Warsh dovish

  • Stefan Rust predicted no rate hike next week and identified oil as the main trigger for policy change.
  • 64% was the highest Polymarket probability assigned to a September hike after Thursday’s PPI release.
  • Truflation expects Friday’s headline CPI inflation to reach 3.4%, with energy the largest upside risk.

Truflation CEO Stefan Rust said Federal Reserve Chair Kevin Warsh’s hawkish rhetoric masks what Rust considers dovish instincts, and predicted no rate hike at next week’s meeting. He identified oil as the key risk, saying a move above $110 could prompt an increase after oil traded near $97 on Monday. Since then, Middle East hostilities have intensified and Brent crude has risen above $104. Thursday’s producer-price index (PPI) showed annual producer-price inflation accelerating from 4.8% to 5.4%, while energy prices rose 4.2% from July. Polymarket traders raised the implied probability of a September hike from about 50% when Benzinga interviewed Rust to as high as 64% after the PPI report. Friday’s consumer-price index (CPI) report is the next test, with Truflation expecting headline inflation of 3.4%. Rust said Warsh’s focus on trimmed-mean inflation, the Taylor rule and timely data, alongside Truflation’s lower readings, weakens the case for higher rates. He also argued that Warsh is closer to Treasury Secretary Scott Bessent’s preference for lower rates than public comments suggest. Rust said a quarter-point increase would make it much harder for the Treasury to reduce the budget deficit to 3% of GDP, which he said the war has already made nearly impossible, and described Bessent as having more influence and power than the Federal Reserve chair. Truflation says its real-time inflation measure has historically led official CPI by about 41 days, while warning that energy is the largest upside risk beneath the headline. Rust said artificial-intelligence investment is currently inflationary because data-center construction is straining labor, electricity and equipment supplies, but expects productivity gains to outweigh those costs within three to nine months and become more significant next year.

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