Natixis’ chief U.S. economist, Christopher Hodge (the former chief U.S. economist at the New York Fed), said inflation will be the FED’s top focus for the remainder of 2026, but that does not mean monetary policy will shift immediately; his baseline forecast includes an “extended pause” throughout 2026, with the FED led by Warsh expected to keep interest rates unchanged.
Hodge’s inflation assessment: housing has a 35% weight, and core momentum isn’t clearly heating up
According to Hodge’s analysis, the key macro data supporting the “no rate hikes this year” view are as follows: housing’s weight in the CPI is about 35%, making it the single largest factor affecting the inflation trajectory. Real-time indicators suggest housing inflation may remain moderate over the next few months, and could even ease slightly; wage growth is about 3% to 3.5%, which is in line with the roughly 2% inflation target and does not show evidence of wage-driven second-round inflation pressure.
Hodge emphasized that the price pressure over the past two years has mainly come from exogenous factors such as tariffs and energy shocks. The FED needs to distinguish between “one-off exogenous shocks” and “domestically generated inflation drivers,” and the latter has not clearly accelerated so far; a rate hike in July is “not in the current scenario,” because “if June didn’t do it, July won’t hike.”
Potential policy constraint from Warsh’s hawkish posture: scenario risk if CPI beats expectations twice
Based on Hodge’s warning, if Warsh is overly hawkish early in his tenure, it could create future policy constraints—whether the FED will be forced to take action if the next two CPI readings come in above expectations, due to the earlier stance being too forceful, is an open question.
Hodge also noted that Warsh has generally been hawkish throughout his career, and his recent comments look more like a “return to his usual stance” rather than simply demonstrating independence to Trump; when Warsh competed for the FED chair in 2017 and 2025, he showed a more dovish side twice, but Hodge believes that was more about communicating to different audiences. His recent remarks may indeed create some tension between Warsh and his colleagues, but in the long run it amounts to a “return to the mean.”
FAQ
Why does Hodge forecast the FED will keep rates unchanged throughout 2026?
Based on Hodge’s explanation, the core argument is: housing inflation (35% of CPI) is likely to remain moderate over the next few months, wage growth (3%-3.5%) is consistent with the 2% inflation target, and since the June FOMC core PCE has been better than expected, oil prices have fallen, and NFP has come in weaker than expected, none of these support rate hikes; until there is a clearer understanding of how exogenous shocks such as tariffs and energy transmit to core inflation, taking a wait-and-see stance is more prudent. This is Hodge’s personal forecast and does not constitute investment advice.
Why is Warsh’s hawkish stance seen as a potential risk?
According to Hodge’s warning, if Warsh’s tough stance early in his tenure pushes market expectations too high, then when the next two CPI readings come in above expectations, the FED could face pressure to hike rates. Monthly data can be quite volatile, and against the backdrop of stronger hawkish expectations, whether the FED can still choose not to hike if inflation re-accelerates is an open question. This is Hodge’s personal analysis and does not constitute investment advice.
How does Hodge assess the trend of global central banks increasing gold holdings and de-dollarization?
Based on Hodge’s explanation, the 2022 war in Ukraine was a catalyst that accelerated de-dollarization and increased gold purchases across countries, but uncertainty in U.S. policy—especially trade and sanctions policy—is the fundamental reason that continues to drive this trend. A more common pattern is that dollar positions “no longer roll over investments,” like a “quiet exit,” rather than a large-scale sell-off of dollar assets. Hodge believes that the vitality of the U.S. private sector will continue to support the dollar, but official demand for assets may weaken somewhat.
