Fed Hawks, Doves and the Dollar: Who Wants More Rate Hikes?

Ask ten traders what the Federal Reserve is going to do next and you will get ten different answers. That is not because they are bad at their jobs. It is because the Fed itself is not speaking with one voice. With the next decision due on October 28, here is a plain-English guide to who is saying what, and why the dollar keeps trading near its highest level in about 18 months.

The Hawks: More Hikes Needed

Two officials dissented in favor of a rate hike back in July, and both have kept their tone firm. Cleveland Fed President Beth Hammack says further tightening is needed and describes the economy as thriving, though she has also said she is open to adjusting the pace of increases. Minneapolis Fed President Neel Kashkari also sided with the hike camp in July.

Governor Christopher Waller sits in a slightly more flexible spot. He has said he anticipates additional hikes, but also that they do not have to come at back-to-back meetings. That distinction matters a lot to the market: it opens the door to a pause in October without ruling out more tightening later.

The Centrists: Watching the Data

New York Fed President John Williams has signaled little urgency, suggesting one more hike may be enough. Vice Chair Philip Jefferson has stuck to a data-dependent line while noting that inflation risks are tilted to the upside.

The Chair: Deliberately Vague

Fed Chair Kevin Warsh has made a point of not giving the market a road map, telling reporters he is not in the forward guidance business. For traders who like clear signals, that is frustrating. For the dollar, it means every speech and every data point carries extra weight, because there is no official guidance to anchor expectations.

What the Market Is Betting On

Futures traders see a low chance of a hike at the October 28 meeting, roughly 20%, but a much higher chance of one in December, somewhere between 70% and 85% depending on the source. Goldman Sachs has moved its call for the next hike to December from October, which helps explain why the market has settled on that timing.

Notably, the two-year Treasury yield slipped after Waller’s latest comments, a sign that traders heard “not necessarily back-to-back” and priced in a slightly gentler path.

Why This Matters for Currency Traders

• Dollar pairs react to every Fed headline. With no formal guidance, speeches are doing the job that forward guidance normally would.
• The timing debate drives short-term moves. A hot inflation report could drag the October odds higher, which would give the dollar another lift.
• Disagreement is a volatility signal. A divided committee often means bigger market reactions when data surprises.

Dates Worth Marking

• October 14: US September CPI
• October 15: Fed Chair Warsh appearance, the last big one before the blackout period
• October 27 to 28: Fed meeting, with the decision on October 28 at 2:00 p.m. ET

The Takeaway

The Fed’s message right now is “more hikes are likely, but we have not decided when.” That is a hawkish backdrop that supports the dollar, while the lack of clear guidance keeps the market jumpy around every data release. Until the October meeting gives us a firmer signal, expect the dollar to take its cues from inflation prints and from whatever the next Fed official says.

This article is for informational purposes only and does not constitute financial or investment advice. Forex trading involves substantial risk of loss.