FEDWATCH FLIPS HAWKISH — SEPTEMBER HIKE ODDS JUMP FROM 40% TO 57% IN ONE WEEK — WARSH CALLED 2% A “FIRM, FIXED TARGET,” INFLATION IS STILL RUNNING DOUBLE THAT

Kevin Warsh told Jackson Hole on Friday that the Fed’s 2% inflation target is “a firm, fixed target,” and that he’s “committed to a discipline, not a decision.” Three days later, the market decided he meant it. The CME FedWatch Tool now prices a 57% chance of a quarter-point hike at the September 16 meeting — up from 39.9% one week earlier. Polymarket has it closer to a coin flip, 48% hike against 52% hold, with $66.6 million riding on the contract and rate cuts down to a 1% side bet. Here’s the number that actually explains the move: twelve-month inflation sits at 3.7%. The six-month reading, the one that shows where things are heading, is 4.1%. The target Warsh just called firm and fixed is 2%. That’s not a rounding error, and it’s not a Fed about to cut anyone slack — unemployment is 4.1%, the S&P is up more than 20% on the year, people are still spending. Nothing in that data forces a hand tighter than what he’s already signaling. A target that moves whenever the data gets uncomfortable was never a target — it was a suggestion with better branding. Bitcoin priced a Fed that blinks. This week it’s finding out what happens when the Fed decides discipline means something.