The Fed may be on the verge of a serious mistake, prominent economists warn

Marketwatch ^ | Sept. 14, 2026 | Greg Robb Follow

[lasereye]

Investors on Wall Street and observers of the Federal Reserve in Washington largely expect the central bank to raise interest rates when it meets this week, but some prominent economists are warning that such a move could prove to be a mistake.

They see the economy as more vulnerable to a steep slowdown in growth than commonly believed. The Fed’s job is to keep employment steady and inflation under control. If central bank officials raise rates on Wednesday, the goal will be to cool inflation. But these economists worry that a rate hike could cause a sharp cut in economic activity, which could prompt businesses to let go of workers and ultimately lead to a recession.

“The odds of a serious Fed policy mistake are uncomfortably high and rising,” warned Mark Zandi, chief economist at Moody’s Analytics, in a post on X.

It’s hard to slow economic growth without layoffs, rising unemployment and igniting a “self-reinforcing negative cycle,” said Zandi, who has advised leading Democrats over the years.

In late August, Fed Chairman Kevin Warsh used his remarks at the Jackson Hole economic symposium to signal that he was concerned about inflation trends. He said he wouldn’t hesitate to act if the inflation picture worsened.

Ten days ago, investors put the odds of a rate hike at about 50%. But rising diesel prices, renewed tensions in the Middle East and Friday’s hotter-than-expected consumer inflation report have convinced traders and economists that Warsh will follow through on his tough talk and raise rates.

Fed officials will meet behind closed doors Tuesday and Wednesday to decide whether to hike interest rates or hold them steady. The Fed’s decision will be announced at 2 p.m. Eastern time on Wednesday, and Warsh will hold a press conference at 2:30 p.m.

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TOPICS: Business/Economy; News/Current Events
KEYWORDS: federalreserve; inflation; interestrates

[Nervous Tick]

Karl Marx was a “prominent economist”...

[Worldtraveler once upon a time]

Marketwatch.... Subscribe to continue reading.... Create a free account, by handing over your data via Google, Facebook or giving up your name and email address. Marketwatch will be watching — you.

[Zathras]

My sources indicate there is a serious shortage of $$$ available right now.
My feeling its due to businesses in trouble.

[fhayek]

I don’t relish the Fed raising rates, but if they do, the fault lies in a government (both parties included incapable of a delivering a responsible fiscal policy. Inflation is not something that should be ignored, and Fed policy cannot be expected to whitewash the failure of the government’s excessive spending and borrowing.

[ClearCase_guy]

Overheard at the Fed meeting: “How can we screw Trump?”

[Worldtraveler once upon a time]

--- "Karl Marx was a “prominent economist”..."

Don't forget the French's Thomas Piketty.... Prominent, he'll tell you.

[PGR88]

Are these one-handed, or two-handed economists?

[dljordan]

Don’t worry, the right people will be just fine.

[cp124]

F the Fed. Shut down the elites
financial advisors.

[gibsonguy]

This sounds like sniveling little creeps like Robert Reich

[Varsity Flight]

✅

The Government Debt Enslavement Cult, Big Un-Beautiful Signed Trump Bill, and his Predessesors, in your face arrogance, march on.

The Golden Parachute Class

[steve8714]

Never.

[Bobbyvotes]

Economists have correctly forecast 10 of the last 5 recessions.

[Red Badger]

How bout they just don’t do anything and let it ride..........

[proxy_user]

Raising the short-term rate may be the only way to bring down the long-term rates. If bond traders don’t think the Fed is taking inflation seriously, they will dump long-duration Treasuries.

[Track9]

So was the obozo’s stash lady.

[PTBAA]

This inflationary cycle is not being caused by too much, money chasing too few goods. It is being caused by too little oil and diesel affecting the price of everything.

Raising borrowing costs does not solve that problem.

[Nervous Tick]

>> Never.

Sure he is! He even wrote a book with an economistic-sounding name. “The Capital” or something. He has a lot of worshipers in The Academy. The Academy is quite prominent, you know.

[baclava]

You’ll live in a van down by the river and be thankful you have that!