# Kathleen Hays Presents: Central Bank Central
## Mahedy Sees One Fed Rate Hike in December, If Inflation Doesn’t Behave More Could Come Fast
CEO of Access/Macro, former chief of staff to SF Fed chief Daly, sees “a lot of discord” within FOMC, worries that Fed collegiality could become ruptured
Tim Mahedy is the CEO and Chief Economist at business consultancy Access/Macro drawing on his work a senior economist at KPMG, and prior to that as Chief of Staff to SF Fed President Mary Daly and a forecaster for NY Fed President John Williams to do research for corporate boards across the country. He joins me shortly after the Fed has just released the minutes of its September meeting saying it looks like the just-released minutes “<were> all over the place.”
He is struck by the move from a 9–3 FOMC decision to hold rates steady at the July FOMC meeting to the unanimous rate increase it has just done now in September. “You know honestly it’s the July description of inflation in different words.” In his view, the minutes’ description of inflation changed little between those meetings, making the policy reversal difficult to explain through the data alone.
Tim suggests that internal FOMC dynamics may have contributed to this policy unanimity, rather than a clearly worsening inflation outlook. His concern is that rate hikes intended to protect inflation credibility could hit a labor market that is less resilient than it appears. As he puts it, “it makes me think there’s other things going on besides inflation.”
For now, he does not expect a rapid move back to the Fed’s 2% inflation target but instead “a stalling of inflation like we’ve seen the last two years.”
”**Inflation is probably not going to cool. That <cooling> seems unlikely. But if it stalls out, I think we get a December hike**,” Tim predicts. But if it starts to show real pressure…maybe we get into summer <with rate hikes>…But it’s an interesting time to be doing this. I just don’t see the inflation story they are looking at.”
He also sees a world that “ a world, maybe even a likely world, where the Fed will be raising interest rates, even if inflation was at 2%.”
”There’s the camp of inflation-concerned people like (Cleveland Fed president Beth) Hammach and all the folks you just mentioned, who are like we got to raise because inflation’s a problem. We’re going to finally do something about it,” Tim says. “And then there’s people like (Fed chair) **Warsh** who are like, hey, actually AI is changing the world and fundamentals are getting better. So we’ve got to raise anyways.”
On the question of what the Fed will do on rates this year, and how this will feed into the recent selloff in bonds and where that goes next, Tim adds what he sees as a large and growing force: “_a lot of discord on the Fed, and I think it’s leading uncertainty”…_”And we can see that in financial markets….”
”Add to this to Fed Chair Kevin Warsh’s previous speech at the Kansas City’s Fed Jackson Hole… where he had that speech and all of a sudden we’re like, oh, he maybe he’s going to hike.”
