A quarter-point September rate increase is now the analyst’s preferred call, with another 50 to 75 basis points possible by year-end to keep inflation moving convincingly toward 2%.
Core PCE rose 0.2% in July—about a 3.0% annualized pace—and the analyst argues that recent disinflation is only modest, leaving inflation still well above target despite some softer summer readings.
Three risks drove the shift from hold to hike: a prolonged Middle East conflict keeping energy prices high, a Canada trade fight that could bring more tariffs, and AI-driven memory-chip shortages lifting prices.
The analyst says those shocks are no longer clearly temporary enough for the Fed to look through, especially with gasoline at a record Labor Day level and hyperscaler AI spending projected above $1 trillion next year.
Next week’s Fed meeting and updated dot plot will show whether officials share that reassessment, though the analyst says better CPI, PPI or geopolitical news could still justify staying on hold.