At 2 PM Eastern on Wednesday, the Federal Reserve is expected to raise interest rates for the first time in three years. Futures traders assign a 93% probability to a quarter-point increase, according to CME FedWatch. Goldman Sachs has revised its forecast to match. Twenty-nine of thirty-two former Fed officials surveyed by Jon Hilsenrath and Duke University's economics department recommended a hike. The only real uncertainty is what the man presiding over the decision refuses to tell you.
The Blank Dot
In June, the Federal Open Market Committee released its Summary of Economic Projections. Nine of eighteen officials who submitted projections favored at least one rate increase before year-end. Chair Kevin Warsh did not submit projections. He told reporters he had "refrained from offering any projections of my own, consistent with my long-held views."
Wednesday's meeting will produce an updated dot plot alongside the rate decision. If Warsh abstains again, twelve dots will show where the committee thinks rates are going. The thirteenth, absent, will show what the chair is unwilling to commit to.
The Double Bind
The Wall Street Journal's Nick Timiraos reported that President Trump has spoken repeatedly with Warsh since he became chairman. White House National Economic Council Director Kevin Hassett said Sunday that the president "100% respects the independence of Kevin Warsh" and would "100% support" the Fed's decision. He added that Trump wouldn't be "super happy" about a rate increase and warned that the Fed "risks its reputation for staying out of politics when it changes rates near an election."
The midterm elections are seven weeks away. The next FOMC meeting concludes October 28, six days before voters go to the polls. Kiplinger's staff economist David Payne noted the safest political route: raise rates in September and December, hold in October.
Timiraos framed the paradox: standing pat when investors widely expect an increase would feed the suspicion that Warsh was accommodating the president who appointed him.
The Testimony
While the FOMC deliberated on Tuesday, Treasury Secretary Scott Bessent appeared before the House Financial Services Committee. He touted the S&P 500's roughly 27% gain since Trump took office, cited 64 million tax returns claiming the administration's tax cuts, and said wages for the bottom quartile of earners are rising faster than the top.
Rep. Maxine Waters, the ranking Democrat, was unimpressed. "Despite your feeble efforts, there continues to be a sell-off of U.S. Treasuries," she told Bessent. Rep. Ayanna Pressley of Massachusetts said his defense of the economic record made her question "not only your integrity, but if you're operating in the same reality as the people whom you are accountable to."
The ten-year Treasury yield traded at 5% midday Tuesday, briefly touching 5.041%, a level not reached since 2007. The thirty-year yield hit 5.367%. The thirty-year fixed mortgage rate topped 7% last week.
Bessent defended Treasury buybacks of mispriced long-dated bonds. "There was the counterfactual of what it would have done," he said. "And then we proceeded to have two of the most successful bond Treasury auctions that we've had in twenty years."
The Arithmetic
August CPI printed at 3.4% headline, with core inflation at 2.4%. Payrolls grew by 162,000 jobs. Producer prices rose 0.4% in the month, with the annual rate at 5.4%. West Texas Intermediate crude gained 20% in the first fifteen days of September, trading above $103 per barrel. Diesel hit an all-time high of $6.23 per gallon, up $2.54 from a year ago. Regular gasoline averaged $4.32, up $1.14.
The University of Michigan consumer sentiment index fell to 47.8 in September, its second-lowest reading since 1952.
One former Fed official in the Hilsenrath survey identified the convergence: "The upside risks to the inflation outlook have worsened since July: energy prices have not reversed as expected, tariff pass-through continues, and the AI build-out is adding to price pressures."
The Holdouts
Not everyone sees urgency. Governor Christopher Waller questioned on September 3 what a single quarter-point move would accomplish for inflation and argued the situation called for waiting. New York Fed President John Williams also conveyed little urgency.
Goldman Sachs economist David Mericle told clients the firm does not see a strong economic case for raising rates, attributing the inflation overshoot to one-time factors. Goldman revised its forecast to a hike anyway, concluding that the weight of market pricing left the Fed little choice.
Deutsche Bank's strategists calculated that if the FOMC votes to hold, it would be the biggest dovish surprise at a scheduled meeting on record, going back to 1994.
The Signal in the Noise
Wells Fargo's Paul Christopher argued that rising yields reflect war, tariffs, and competition for capital from AI hyperscalers rather than an erosion of demand for U.S. government debt. He pointed to the September 9 ten-year Treasury auction, where the bid-to-cover ratio reached 2.71, the strongest since 2019.
The stock market carried its own weight. AI safety concerns pulled semiconductor stocks lower on Monday: Nvidia fell 3.4%, AMD 4.8%, Intel 5.4%, and Vertiv 7.8%. The selling continued Tuesday as the FOMC convened. The Dow lost 328 points to close at 52,092. The S&P 500 fell to 7,585. The Nasdaq dropped to 25,981.
Futures markets are pricing two quarter-point increases by December. By September 2027, the implied rate reaches roughly 4.6%. The dot plot will tell you whether the committee agrees. But the dot that matters most may be the one that isn't there.