Odd Lots · Tuesday, September 1, 2026
Adam Posen believes that despite potential short-term fluctuations, inflation is showing persistence, particularly in services. He anticipates the Federal Reserve will likely hike interest rates further, possibly in both September and December, leading to a higher Fed funds rate in six months. He notes that while the US labor market is resilient, inflation shocks are becoming more likely.
“So my view is the Fed is going to hike. If they don't hike in September, they're certainly going to hike in December. I expect if they hike in September, they're still going to hike in December. And so six months from now, Fed funds will be 75 pips or 100 pips higher than it is now.”
“And inflation will start coming down for reals, as the kids say. But until then, we're going to be in this three and a half to four and a half range with some upside risk.”
“But the big point was, whenever the next inflation shock comes, it's gonna go worse. I had no idea that the President of the United States would bomb Iran and ignore the fact that disrupting the Straits of Hormones might have some inflationary effects beyond whatever else you think of it. But I knew there was gonna be an inflation shock and we were primed to have more.”