Fed Rate Hike Odds Jump: Why Kevin Warsh’s ‘Work To Do’ Comment Has Barclays Reportedly Calling For Two More Hikes

• Barclays had previously expected the Fed to leave rates unchanged through the rest of 2026.
• The probability of a 25-basis-point rate hike in September climbed to 61.9% from 41.4% last week, according to the CME FedWatch tool.
• Bank of America said rising commodity costs could continue to pressure consumer-staples companies during the second half of 2026.

The Federal Reserve could have more rate hikes ahead than investors previously expected. Barclays now reportedly forecasts two 25-basis-point increases in 2026, after Fed Chair Kevin Warsh warned that policymakers still have “work to do” to bring inflation back to meet the 2% inflation target.  

The brokerage forecasts a 25-basis-point increase in September followed by another hike in December. It previously expected the Fed to leave rates unchanged through the rest of 2026, according to a Reuters report on Monday.

Barclays expects inflation to ease on a monthly basis, but said comparisons with lower readings from last year could keep the annual inflation rate high through December.

Warsh’s ‘Work To Do’ Statement Key To Potential Hikes

In his prepared remarks on Friday at the Jackson Hole summit, Warsh said the Fed needs clear evidence that inflation is moving toward its target or may have “work to do” if that improvement does not materialize.

“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That's our job . . . our mandate . . . and our charge to keep,” Warsh said.

Warsh added that the Personal Consumption Expenditures (PCE) readings had not convinced him that underlying inflation had meaningfully improved. Former Fed Vice Chair Richard Clarida called Warsh’s “work to do” the key phrase.

The PCE Index, the Fed’s preferred inflation gauge, most recently rose 3.7% from a year earlier, well above the central bank’s target.

BofA Says Commodity Prices To Keep Pressure On Consumer Staples Market

Meanwhile, Bank of America said rising commodity costs could continue to pressure consumer-staples companies during the second half of 2026, according to Investing.com.

Food prices rose 3% in July, while companies have had limited room to pass higher costs on to customers.

Commodity markets have also seen sharp swings amid geopolitical tensions, changing energy prices and weather-related disruptions, including speculative trading tied to El Niño, BofA added.

CME Data Shows Increased Bets On September Rate Hike

Traders raised their expectations for a rate increase next month. The probability of a 25-basis-point rate hike in September climbed to 61.9% from 41.4% last week, according to the CME FedWatch tool.

Markets were trading marginally lower in pre-market trading, with the SPDR S&P 500 ETF (SPY) and the SPDR Dow Jones Industrial Average ETF (DIA) down 0.17%, while the Invesco QQQ Trust (QQQ) fell 0.12%. Retail sentiment around QQQ turned ‘neutral’ from ‘bearish’ on Stocktwits.

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