The Federal Reserve is widely expected to raise interest rates on Wednesday, but the Breitbart Business Digest argues the central bank may be tightening at precisely the wrong moment — bowing to market expectations just as the economy looks less capable of absorbing the hit.
According to the Breitbart analysis, a single quarter-point hike, or even a couple before year-end, is unlikely to derail the economy on its own. But there is no urgent need for higher rates right now, and the Fed could afford to wait.
A theory driving policy
The case for hiking, as Breitbart describes it, rests in part on a relatively new theory inside the Fed: that repeated supply shocks risk un-anchoring inflation expectations. If the public is hit often enough by shocks that push prices higher, the thinking goes, it will eventually conclude this is simply the new normal — lifting expectations and, ultimately, actual inflation.
Breitbart argues that theory has little support in the data. The 10-year breakevens — a key market gauge of inflation expectations — sit exactly where they were in February, before the war with Iran and the resulting jump in gasoline prices. While short-term consumer expectations have climbed since the war, longer-term expectations have barely moved, and business inflation expectations tracked by the Atlanta Fed remain benign.
The outlet also disputes the framing that the inflation surge of the Biden years was primarily a supply shock. Supply chain problems and Russia’s invasion of Ukraine did push energy prices higher globally, Breitbart acknowledges, but it lays the worst inflation in four decades at the feet of the Biden administration’s deficit spending and the Fed’s decision to hold rates too low for too long. On that reading, the economy is not grappling with the latest in a chain of supply shocks at all.
Markets have already decided
Whatever the merits of the theory, Breitbart notes it has convinced markets and analysts that a hike is coming. Fed funds futures imply roughly a 90 percent chance of an increase this week and about a 50 percent chance of another by the end of the year. Reuters’ survey of economists found 85 percent now expect a quarter-point move.
Fed Chairman Kevin Warsh’s speech at Jackson Hole last month was read as hawkish when delivered — and has come to be seen as even more hawkish in the weeks since, Breitbart reports. A hotter-than-expected August core consumer price index and a much stronger-than-expected labor market report added to the impression.
With expectations so firmly set, not hiking would be severely disruptive to financial markets. The risk, per Breitbart, is that the Fed delivers the hike the market demands at the same time the economy is losing its capacity to absorb one.
The case for patience
A notable argument for waiting came this week from Mark Zandi, chief economist at Moody’s Analytics. Zandi contends that forcing inflation down faster requires pushing growth below its potential — which would almost certainly mean raising rates enough to trigger layoffs, rising unemployment and a broader slowdown. The difficulty is that once that path is taken, getting the calibration exactly right is nearly impossible; momentum matters in an economy, and the intended cooling can turn into an unintended slump.
Breitbart points to a structural problem, too: the underlying source of today’s inflation is already contractionary. Higher energy prices squeeze household purchasing power while raising business costs, and higher interest rates cannot reopen an oil shipping route or refine more gasoline. Rate hikes work by making financing more expensive and suppressing spending — tightening the squeeze on consumers without doing anything to bring down the oil prices that pushed the index higher.
In effect, Breitbart writes, the Fed would be forcing other prices lower to offset a supply shock, with the likely result being lost output and lost jobs.
A second reason to wait
The AI investment boom may also be approaching a slower phase, according to the digest. Leaders of major AI labs are calling for a slower development pace and more regulation, and Bloomberg’s Joe Weisenthal, in Monday’s Odd Lots newsletter, flagged a shift in the conversation around artificial intelligence — safety concerns and demands for oversight beginning to collide with expectations of ever-expanding capabilities and infrastructure spending.
That shift would not stay confined to Silicon Valley. The AI buildout has been a significant support for demand for chips, power equipment and construction, boosting the profits of suppliers and the hiring of their workers.
Breitbart cites analyst Izabella Kaminska for a more skeptical read: the infrastructure race has partly been about outspending competitors into submission, and more efficient models could undermine that strategy, while safety concerns offer a respectable rationale for retreating from extravagant spending commitments. The spending contest was never sustainable, on this view — the goal was to dig an economic moat around incumbent AI powers and convince rivals to spend themselves into an early grave.
Zandi warns that tightening could either restrain the AI boom or place more pressure on the rest of the economy. If the boom is already losing steam, Breitbart notes, a hike risks doing both.
The road ahead
Holding rates steady, Breitbart argues, would preserve the option to act later if services inflation accelerates or expectations deteriorate, and would give policymakers time to assess whether the economy’s biggest investment story is changing.
The Fed, in that view, has time to learn more before charging American workers for an accelerated return to 2 percent inflation. But with Wednesday’s move all but priced in, the digest concludes that the best hope may be a Fed that paces itself and shows patience at future meetings.
Source: www.breitbart.com — https://www.breitbart.com/economy/2026/09/14/breitbart-business-digest-the-fed-might-be-hiking-at-the-wrong-moment/