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The Federal Reserve is unlikely to deliver a surprise interest rate increase at Wednesday’s meeting, according to Natixis. Still, the decision could revive the divisions seen in July and offer investors clues about the central bank’s priorities for the remainder of 2026.

Natixis economists Christopher Hodge and Selin Aker said recent comments from Federal Reserve officials have sent mixed signals on monetary policy. Collins, Paulson and Hammack appeared inclined toward further increases, while Jefferson, Williams and Waller seemed to favor waiting after the rate increase at the previous meeting.

Federal Reserve Chair Warsh, meanwhile, has maintained a neutral tone. Hodge and Aker expect the central bank to leave its policy rate unchanged, with the upper bound remaining at 4.0%, after raising rates in September for the first time in three years.

The decision could nevertheless reveal renewed disagreement within the Federal Open Market Committee. The economists believe regional Federal Reserve Presidents Logan, Hammack and Kashkari, who dissented in July, are likely to oppose another pause and favor a 25 basis point increase.

“After hiking for the first time in three years in September, we expect the Fed to keep its policy rate on hold at an upper bound of 4.0% when it announces its policy decision on Wednesday,” they said. The economists added that the three July dissenters could again vote for an increase.

Hodge and Aker acknowledged that Warsh could press for an unexpected rate move, but they regard that outcome as unlikely. Volatility in yields and weakness among some technology and AI names have reduced the urgency for officials to tighten financial conditions further during the period between meetings.

Keeping rates unchanged would also help shield the central bank from criticism by the White House, according to the Natixis economists. Their analysis places particular emphasis on Warsh’s press conference and what his answers may reveal about his policy focus.

Hodge and Aker expect Warsh to face questions about the latest consumer price index report. They believe he will emphasize inflation trends rather than a single monthly reading, giving the committee room to look beyond volatility in individual data releases.

The economists also expect Warsh to discuss financial conditions again. Credit spreads, mortgage rates, yields and market volatility have moved recently, but Natixis cautioned that any reference to financial conditions should not automatically be interpreted as a dovish signal.

Instead, such comments could present risks on both sides of the Federal Reserve’s mandate, provided financial conditions do not loosen. That distinction may matter as investors search Warsh’s language for evidence about the likelihood of another increase at the December meeting.

Natixis anticipates another short press conference, similar to the September appearance, which was noticeably shorter than those conducted during the previous few years. Hodge and Aker do not expect follow up questions or an extensive explanation of either Warsh’s thinking or the committee’s deliberations.

The economists said early missteps and a preference for revealing little could make shorter, less informative press conferences standard under Warsh. That would leave markets drawing more heavily on policy statements, voting patterns and carefully limited remarks for signs of the Federal Reserve’s direction.

Beyond Wednesday’s meeting, Hodge and Aker expect the central bank to remain focused on inflation. They remain cautiously optimistic about the outlook, though they said their confidence has declined after an unusually noisy and elevated September consumer price index reading.

Their forecast assumes that price pressure from tariffs and higher energy costs will fade. Under that scenario, domestically generated inflation would continue slowing, while core inflation would move lower and give policymakers more room to avoid tightening monetary policy too aggressively.

The economists also pointed to weak consumer confidence and real wage gains that are flat or negative. In their view, those conditions make a renewed burst of demand capable of sustaining the current pace of activity and above potential economic growth difficult to envision.

Natixis expects slower growth to contribute to disinflation and encourage greater caution at the Federal Reserve. Hodge and Aker forecast only one additional increase during the current cycle, at the December meeting, contingent on encouraging inflation readings and further concerns about the growth outlook.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.