Payden & Rygel: Fool me thrice?

Payden & Rygel: Fool me thrice?

12 oktober 2026

Monetair beleid Fed

The Federal Open Market Committee's September meeting minutes released this week showed that many participants thought the September rate hike was 'prudent on risk-management grounds'. But with the three-month moving average of monthly core PCE inflation now running at apace consistent with the Fed's 2% target, is the inflation risk behind us?

Not so fast. First, the last three months benefited from two very softprints that may not repeat. Second, risk management wasn't the only motive for hikes. Some policymakers want to keep sector-specific shocks from spreading, and a few see a higher neutral rate, meaning rates should be higher for longer.

Others, like Governor Waller, worry that after 'five and a half years' above target, the latest acceleration will push households and markets 'to revise up their expectations for future inflation'. Indeed, core inflation cooled in the second half of each of the last two years, then re-accelerated in the first half, and it's still at 3% today.

As the old saying goes, 'Fool me once, shame on you. Fool me twice, shame on me'. With two inflation head fakes, policymakers aren't falling for a third. In turn, we expect the Fed to hike three more times and to stay restrictive until year-over-year core inflation is much closer to 2%.

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