Markets were putting a 90% probability on a Federal Reserve rate hike the day before the September meeting began. Wendy Edelberg puts it closer to a coin flip.
The consensus reading is that Kevin Warsh has painted himself into a corner: a hawkish Jackson Hole speech on one side, a president who appointed him and wants rates lower on the other. Edelberg's argument is that the corner has an exit, and that it was built by the bond market rather than by the Fed.
"He said he wanted tighter financial conditions and he's gotten them. So I think he could make an argument for markets having done the job that the Fed might have had to do and that they don't need to raise rates."
Edelberg is a senior fellow at the Brookings Institution, and what she brings to this conversation is the revision calendar: she expects core PCE inflation to be marked down at the end of September and employment data to be marked weaker, neither of which the FOMC will have in hand when it votes.
The full segment is covered here so you can skip it.
Here are the 3 arguments that matter.
👤 Guest: Wendy Edelberg, Senior Fellow at the Brookings Institution
🎙️ Host: Kai Ryssdal, host and senior editor of Marketplace
📰 Published: 14 September 2026 on the Marketplace podcast feed (American Public Media)
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ length not available
Key Takeaways
Markets put a 90% probability on a hike this week and Edelberg puts it at a coin flip
She says she would not fall off her chair if they hike and would not be shocked if they stand pat
Her case for no hike is that the bond market has already delivered the tightening
Warsh said he wanted tighter financial conditions, and on her reading he now has them
Core PCE inflation is about to be revised down by a few tenths, and the committee will know it is coming without having the data
May to August could land around 2.4, which she calls within spitting distance of the 2% target
A second, separate argument for standing pat is coming from the labor market, not from inflation
State-level data point to employment revisions that show a weaker job market than the published figures
Washington is managing the level of interest rates in basis points
She says that is what explains how hard the Treasury Secretary is pushing to get yields down
Tech borrowing is part of why rates are where they are, so this is not purely a policy story
1. Resilient, Like a Dirty Word
Kai Ryssdal opened the program on a week with a Fed meeting in it — "Borrowing costs are up, energy costs are up, and related as we learned last week. Inflation is still up. The stock market is a little bit dyspeptic. Consumers the same," he said — and asked Edelberg for ground truth on the state of the economy in mid-September.
Her one-sentence answer separated the policy from the outcome: "I mean, policy is doing its best to derail it, that's for sure. But it has remained resilient."
Ryssdal heard the reservation in it and named it: "You say resilient like it's a dirty word."
What she means by resilient is that a market assumption is being tested rather than confirmed. "I think markets have been, you know, and businesses have been assuming that surely President Trump will be disciplined by, what he knows would be the economic effects if he was too irresponsible with a war in Iran, if he was too irresponsible with tariffs," she said
"And I think you're seeing some glitches in market prices as like that theory is being tested."
She named the two live tests: the trade war with Canada, and the stepped-up hostilities with Iran with, in her words, no sense of how that ends
2. A Game of Basis Points
Ryssdal picked up on her word "disciplined" and pointed out that the discipline they had discussed on the program before — the bond market keeping the president inside the lines — has not held. "And clearly that's not the case. We've got the ten-year this morning topping 5%. The 30 year was it like 5.3? or something, so the bond market is having none of it," he said.
Edelberg's answer is that the attention is running the other way: the administration is watching rates, not the reverse. "The Trump administration is paying very close attention to the level of interest rates. I think that explains why Bessent is trying so hard just to get them down. It's a game of basis points that he's playing," she said
Ryssdal translated for the audience and she picked it back up, agreeing that the whole game is being played in hundredths of a percentage point
She then declined to give Washington all the credit for the level of yields: "But I don't think that actions by the Trump administration or by Congress are the sole reason that interest rates are where they are. I think that there's a whole lot of borrowing going on by tech firms."
Ryssdal flagged that the program would return to corporate AI borrowing later in the show, which it did in its closing note
3. The Case for Standing Pat
With the FOMC meeting starting the next morning, Ryssdal asked her to "Channel your inner Kevin Warsh for me," framing the meeting as a choice between disappointing the market and disappointing the president who appointed him.
Edelberg's read is that the chair does not want to hike: "I mean, yes, he's in a tough spot. But his Jackson Hole speech was quite hawkish. But my guess is that he would like to avoid a hike."
She said her sense, from before he had the job, was that he thought rates generally should be lower given structural changes in the economy
The argument she builds for him is that the tightening has already happened: "He said he wanted tighter financial conditions and he's gotten them. So I think he could make an argument for markets having done the job that the Fed might have had to do and that they don't need to raise rates."
Ryssdal pushed her to keep going — "Keep going. Make it for me because holy cow, it's going to be amazing if that happens." — and she put a number on her own disagreement with the market
"Yeah, I mean, so markets are now putting 90% probability on a rate hike," she said, against her own "I put it more like a coin flip"
The inflation half of her case is that the headline reading overstates the problem: "So the inflation story, I think, looks better than some of the headlines suggest. Core CPI is basically at the rate consistent with target inflation."
The specific thing the committee will not have in hand is a revision. "They're going to get data at the end of September where PCE inflation, Core PCE inflation, the measure that the Fed really cares about, it's going to get revised down by a few tenths," she said, adding "They won't have that exact data in hand, but they will know that it's coming."
On where that leaves the number: "And it could be that what we get for core PCE inflation from May to August is around 2.4. That's within spitting distance of two."
The labor half is a second, independent argument. She expects "we're also probably going to get some revisions to show weaker employment data than what we have in hand. The data from the states is suggesting that."
"And so there are going to be some folks at the FOMC who are worried about the weakness in the labor market."
She distanced herself from that worry while keeping it in the argument: "That's, you know, I'm not, but shock of all shocks, not everyone agrees with me."
Her conclusion was that the meeting has two separate routes to no hike: "And so I think that there might be a labor market argument for standing pat as well."
Bonus Insights
Ryssdal opened the whole program on the calendar rather than a number. "Well, ladies and gentlemen, let me just say it is going to be a week," he said before the show's own ident, and then framed the interview as a look at "where things stand as we roll toward the last quarter of this year."
The exchange ended with the host complimenting the guest and the guest turning it around. "I learned something every single time we have you on this program. And you just made that meeting," Ryssdal said; Edelberg's reply was "You are so nice, Ryssdal. That's why we have you back."
Edelberg's confidence about the September data rests on the Fed's own staff rather than on her forecast — she said Warsh will know the revision is coming "just because he must because the staff is so good."
Edelberg's bottom line is that the case for no hike is stronger than a 90% market probability suggests, because the tightening the Fed wanted has already been delivered by the bond market and both the inflation and the employment data are about to be revised in the direction of leaving rates alone.
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