Mike Feroli said the Federal Reserve's decision next week comes down to the second decimal place of one number: the core consumer price index published on Friday.
Most forecasters going into the meeting are weighing the whole inflation picture. Feroli's version is narrower and more testable — his team's published forecast is 0.21% month over month, and a reading nine hundredths higher changes the call.
"I think if it's 0.29, we'll probably change our call and look for a hike next week."
Feroli is Chief U.S. Economist at J.P. Morgan and spent four years as an economist at the Federal Reserve Board in Washington before joining the bank in 2006, which is the seat he is reading the committee from.
I listened to the full segment so you can skip it.
Here are the 6 takeaways that matter.
👤 Guest: Mike Feroli, Chief U.S. Economist at J.P. Morgan, who publishes the bank's US forecast and was an economist at the Federal Reserve Board before joining it
🎙️ Hosts: Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern, who present Bloomberg Surveillance on Bloomberg Television
📰 Published: 9 September 2026, on the Bloomberg Surveillance podcast feed
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 5 min
Key Takeaways
The hike decision turns on the second decimal place of one core inflation reading
A 0.20 leaves JPMorgan comfortable; a 0.29 and the firm switches to calling a hike next week
Thursday's producer prices matter as much as Friday's, because that is how the Fed's preferred gauge gets built
A methodology change at the end of the month will alter how financial-service prices are read
The inflation that has picked up this year is in goods, and looks like tariffs and energy passing through
Average hourly earnings growth has kept slowing, to 3.1% on a year-ago basis
The strongest case for hiking is insurance against inflation expectations breaking out, not the data itself
A market that has priced 65 basis points is not doing the Fed's work for it
He said Kevin Warsh corrected himself on exactly that point at Jackson Hole
A hike next week might not be a hiking cycle at all
He read Governor Waller as describing a nip and tuck to protect the Fed's credibility
1. The Second Decimal
The show set up the week's calendar — producer prices on Thursday, consumer prices on Friday — and read out Feroli's own note: whether the Fed hikes in September boils down to Friday's report, and JPMorgan forecasts core CPI of 0.21% month over month, which leaves the Fed on hold. The first question was how much the second decimal point really matters.
It matters enough to move the call by itself
"Pretty important, I think, actually, if it's 0.20."
"I think if it's 0.29, we'll probably change our call and look for a hike next week."
He was describing a difference of less than a tenth of a percentage point in a single month deciding whether the largest US bank forecasts a rate rise
2. What's In The PPI
Feroli said the producer price report on Thursday is as important as the consumer one, because the two are combined to construct personal consumption expenditure inflation — the measure the Fed actually targets.
The Fed's preferred inflation gauge is assembled from both reports, so Thursday is not a warm-up
"Now, I think it's also going to be very important what we get on that PPI report on Thursday because how we put that together with the CPI to get the PCE number, which is what they're really focused on, is going to be really important."
Asked which components he watches, he named healthcare first
He flagged financial services as contested: how the statisticians count the price of a financial service is disputed, and "there's going to be a methodology change at the end of the month, which is going to change how we read those things"
His own summary of the exercise was that it adds a wrinkle to how the week's numbers get combined at the end of the week
3. Goods, Not Wages
A host framed the question against the rest of the morning: guests before him had said the economy's momentum comes without an inflation problem, because components unrelated to oil or AI spending have been disinflating. Was that how he saw it, or did he see the broadening in component inflation that Kevin Warsh has described?
Feroli sided with the first view, and located the acceleration in one bucket.
The pickup this year is in core goods, which he reads as tariffs and energy costs passing through
He said the strength "has really come in the core goods bucket, which we think is both tariff pass-through and potentially energy price pass-through"
On the demand side he pointed at pay, which is still decelerating: "When we look at wages, those have been pretty moderate."
Even in a strong jobs report last week, "average hourly earnings growth continued to moderate down to 3.1% on a year-ago basis"
He still gave the hawks their argument, and called it sound
The risk is that supply-driven price rises get embedded in what people expect inflation to be: "That's certainly, I think, a sound reason for acting next week."
"I think there are some sound reasons to hike as an insurance against breakout inflation expectations"
He expects a vigorous debate at the meeting rather than a consensus
4. The Market's 65bps
A host gave the market's own pricing: the gap between two-year Treasury yields and the federal funds rate is 65 basis points, which the host said implies almost three rate increases, and asked whether that is appropriate or whether the market is doing the Fed's work for it. The 65 basis points is the show's number, not Feroli's.
He rejected the idea that market pricing substitutes for a policy decision
"Well, I think that way of thinking about the market doing the work for the Federal Reserve is wrong."
"And I think Kevin Warsh corrected himself, I think, in Jackson Hole in saying, you can't let the market do your work for you. You have to do your own job."
On whether 65 basis points is the right amount, he would not go that far, and turned it back to Friday: a 0.26 print would say yes, a 0.21 would say no
He left both tails genuinely open
"But look, I think there's a case we could see no hikes for the foreseeable future. I think there's a case we could see four hikes for the foreseeable future."
5. The Labor Market Risk
Asked whether four increases could start as soon as September, Feroli said possibly, and gave the condition that would produce them: a labor market that tightens again and finally pushes pay up with it.
The scenario that forces a real hiking cycle is wage inflation reappearing
"We had the unemployment rate come down a full half point from its peak last November."
He said that tightening has not shown up in wages, and that the lag may simply not have run yet
If demand were driving inflation, the response would have to be bigger than a gesture
"I think you have to lean against a demand-driven inflation probably a little more forcefully than a symbolic hike or two to anchor inflation expectations."
6. Not A Hiking Cycle
A host asked whether, in his career, the margin between holding and starting a 100 basis point hiking cycle has ever been this small. Feroli's answer questioned the premise: a hike next week might not begin a cycle at all.
A single increase next week could be a credibility gesture rather than the first of several
"Well, I think there's a question whether this would even be a hiking cycle if we get a hike next week."
He read Governor Waller as having said almost as much the week before: that he may just need to do a little nip and tuck to bolster the Fed's credibility
Asked who is actually driving policy on the committee, Feroli said it is hard to know right now, and that the usual answer would be the chair, the vice chair and the head of the New York Fed
He named Governor Waller as the voice that has filled the gap
"Vice Chair Jefferson has been relatively quiet for a vice chair."
Waller's prominence has risen, in his reading, because Waller has been willing to discuss the data and the factors affecting it at length
Bonus Insights
A host said some people are calling Waller "Chair Waller" and wanted to breathe some life into the idea; Feroli's whole reply was that he is aware of it
The host's framing of the morning is worth recording as the show's own: the guests before Feroli had been, in the host's words, incredibly bullish, and had argued the Fed does not need to hike because the momentum comes without an inflation problem
Feroli's bottom line is that the September decision is genuinely undecided, that the case for moving is insurance against inflation expectations rather than evidence of demand-driven inflation, and that Friday's core reading — 0.20 against 0.29 — is what settles it.
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