Wall Street thought the hiking cycle was over. Now Kevin Warsh has his ‘back against the wall’

The Federal Reserve’s hiking cycle suddenly looks alive again.

Wall Street was already growing nervous. Oil had pushed back above $100, bond yields were surging, the AI capital-expenditure boom continued to add pressure to credit markets, and Thursday’s producer-price report—which feeds into the Fed’s preferred inflation gauge—came in surprisingly hot. But Chair Kevin Warsh’s ambiguity over the Fed’s next move, made Friday’s final inflation data before next week’s meeting unusually important. The outspoken Fed Governor Christopher Waller filled in the gap for traders, signaling that “it may not take much acceleration in inflation” to nudge him into supporting a hike.

The CPI then stepped over that low hurdle. Core consumer prices rose 0.3% in August, above expectations for 0.2%. Headline CPI climbed 0.4%, with gasoline prices jumping 3.9%.