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Morning Edition · Sunday, September 13, 2026Published at 1:20 AM EDT · New York
Warsh's Fed Meets This Week With a Rate Increase Priced at Roughly Two in Three
The European Central Bank has already raised its deposit rate to 2.5 percent, and swaps price a near-certain Bank of Japan increase on Thursday, leaving three of the largest central banks tightening at once.
Three monetary policy decisions within eight days will set the tone for the rest of 2026. The Japan Times frames the week around Kevin Warsh, the Federal Reserve chair since May, whose hawkish remarks at the Jackson Hole conference moved futures markets sharply. CME FedWatch, a tool that tracks trader bets on Federal Reserve moves, put the probability of a quarter-point increase at Wednesday's meeting at about 66 percent. The European Central Bank raised its deposit rate to 2.5 percent on September 10, saying the Middle East conflict would keep inflation above target for an extended period. Swaps price a roughly 97 percent chance that the Bank of Japan will raise its policy rate to 1.25 percent on September 18.
The inflation data support both sides of the argument. United States consumer prices rose 0.4 percent in August and 3.4 percent over the preceding twelve months, according to the Bureau of Labor Statistics, with gasoline up 3.9 percent and responsible for more than a third of the monthly increase. Core inflation, which excludes food and fuel, eased to 2.4 percent. The inflation now being addressed is largely an energy and freight shock, and raising interest rates does not increase the supply of oil.
Equity prices show no sign that investors expect a severe downturn. The S&P 500 rose 0.86 percent on Friday to 7,656.98, and the Dow Jones Industrial Average added 0.98 percent to 52,573.29. Prices for hard assets tell a different story than the stock market does. Gold traded near $4,390 an ounce on Friday and silver near $65, while bitcoin changed hands around $77,278, down about 3.3 percent on the week and roughly a third below its level a year earlier.
In Pakistan, researchers told Dawn that the prolonged Gulf war has driven fuel costs high enough that the State Bank cannot agree on a clear policy direction.
Part of a tracked trend
Renewed Fed Tightening Fears Rattle Global Markets
Over the next 3-6 months stronger US data revives expectations of Fed rate hikes, driving a firmer dollar, equity selloffs in export-heavy markets, and pressure on hard assets as the IMF warns of recurring economic shocks.
What this means
Simultaneous tightening by the Federal Reserve, the European Central Bank and the Bank of Japan reduces the dollar and yen funding available worldwide at the same time, which raises the cost of holding inventory and leveraged positions everywhere. Import-dependent emerging economies such as Pakistan face two burdens at once: they buy fuel priced in dollars, and they must raise their own policy rates to defend their currencies. Gold and silver holding near recent highs while bitcoin sits a third below last year's level shows investors treating monetary metals and liquidity-sensitive digital assets differently.
What to watch
- Whether the Federal Reserve's statement treats energy-driven inflation as temporary or as something it intends to offset, which decides how far the tightening goes.
- The yen after Thursday's Bank of Japan decision, because a Japanese increase without a Federal Reserve increase would narrow the rate gap that has forced repeated currency intervention.
- Whether gold holds its level once real rates rise, which would show buyers are hedging monetary policy credibility rather than simply following the recent price trend.
Observations to monitor, not financial advice.
Synthesized from: The Japan Times · Dawn
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Comments
1Sep 13, 5:20 AM · edited
Simultaneous tightening by the Federal Reserve, ECB, and Bank of Japan eliminates the typical diversification offset and concentrates outflow pressure on emerging market sovereign debt and currencies.