MARKET REVIEW   FOREX   Interest Rates

Fed Hawks Pile Up While Service Prices Spike Fast

Three Fed officials talked about raising rates within 48 hours, right as the ISM Services report flagged the hottest price pressure the sector has seen since 2023.

Followme News Desk  |  August 6, 2026

Three different Fed officials talked about raising rates in the space of two days, and Thursday's services data gave them a reason to keep talking.

It started with Minneapolis Fed President Neel Kashkari. He was one of three officials who dissented at last week's FOMC meeting, pushing for a quarter-point hike instead of a hold, and on Wednesday he went on CNBC and made his case again: "start slowly moving up" rates now rather than wait. His reasoning was pretty simple: earnings are strong, the consumer is fine, the labor market is holding, so where's the evidence that policy is actually restrictive? He pointed to tariff-driven goods prices, fertilizer market disruptions, and the wave of AI infrastructure spending as supply shocks keep inflation stuck. He wouldn't commit to September specifically. He just said the data between now and then will decide it. Markets are currently leaning toward a hike that month anyway, with October priced as the next best shot.

What's more interesting is Fed Governor Lisa Cook, who actually voted to hold rates last week, not against. In a speech in Anchorage she said she's prepared to act by raising rates if inflation doesn't start easing. Her framing: the inflation side of the mandate is now a bigger risk than the jobs side, and the Fed doesn't have room to just wait it out the way it might have had a year or two ago, because an overshoot of these long risks getting baked into how businesses set prices and wages.

San Francisco's Mary Daly rounded things out on Thursday with a more mixed take. She agreed tariffs have clearly pushed inflation up, but said there are early signs that the effect is starting to fade while flagging that heavy tech and AI investment is now doing some of the same damage from a different angle. She still thinks most of this settles down, and said longer-run inflation expectations remain anchored, though she was careful to add that shouldn't be taken for granted. Her tone actually scored slightly less hawkish than her own recent average, so this isn't a unanimous chorus. There are three officials landing in roughly the same place from three different starting points.

Then Thursday's ISM Services PMI added fuel. Headline came in at 54.1% for July, a 25th straight month above 50 and a touch above June's 54.0%. Business Activity jumped to 59.1%, New Orders rose to 57.2%, both strong. But the Prices Index broke 70% for the fourth time in five months at 70.3%, the highest 12-month average since April 2023. Employment told a different story, falling back into contraction at 47.4% after only one month above the line, its weakest since March (ISM).

The Facts

• Kashkari (dissented for a hike last week): pushing for a gradual start to rate increases, possibly as soon as September.
• Cook (voted to hold last week): now says she's ready to support a hike if inflation doesn't ease.
• Daly: sees tariff-driven inflation starting to fade but flags AI-related spending as a new inflation driver.
• ISM Services PMI: 54.1% in July, 25th month of expansion, Business Activity at 59.1%, New Orders at 57.2%.
• ISM Prices Index: 70.3%, the fourth reading above 70% in five months.
• ISM Employment Index: back in contraction at 47.4%, its lowest since March.
• Dollar Index (USDX): trading near 99.7 as of Thursday morning.
• EUR/USD: sitting at 1.1550, its highest level since mid-June.

EUR/USD   $1.1554 as of Aug 6, 2026 - View Live Chart →

What It Means

None of this locks in a September hike. The FOMC held 9-3 last week. Chair Kevin Warsh still won't give forward guidance, and officials seem to be filling that silence themselves. But go back a week and the story was "three dissenters, otherwise quiet." Now Kashkari's repeating his case in public, Cook who voted for the hold says she'd back a hike if inflation doesn't move, and Daly leaves the door open even while sounding the least hawkish of the three. However you read the individual comments, the overall tape got more hawkish this week.

The ISM print backs up the inflation half of that argument more than it undercuts it. A Prices Index above 70% isn't the kind of number that lets the Fed call the fight win, and it's something hawks will point to heading into the September 15-16 meeting. Employment falling back under 50 is the counterweight the doves will use. Strong growth, sticky prices, soft jobs that combination doesn't point traders toward a clean trend, it points toward chop until the picture clears.

Interestingly, the dollar hasn't fully priced this hawkish shift yet. EUR/USD is actually sitting near two-month highs around 1.1550, helped less by Fed doubts and more by fading Middle East risk and a surprisingly strong Eurozone growth print. That's a reminder that this isn't a pure USD story, the euro side of the pair has its own tailwind right now, and the two forces are pulling against each other.

What Traders Should Watch

Fed funds futures into the September 15-16 meeting - the cleanest read on whether the market's actually buying hawkish talk or shrugging it off.

The next CPI or PCE print - all three officials tied their comments to upcoming data, so this is what turns talk into actual repricing.

Friday's jobs report - with the ISM Employment Index back in contraction, a soft payroll number hands the doves their best argument yet.

EUR/USD - the pair is sitting near its two-month high at 1.1560; a clean break opens room toward 1.16, while a fade back under 1.15 would say the Fed-hawk story is starting to win out over the euro's own strength.

Any more Fed speakers before the blackout - this many officials talking in one week means sentiment could still swing either way before September.

The Bottom Line Three Fed officials made the case for higher rates in two days, and a services report with the hottest price reading in over three years backed them up. But the dollar hasn't fully bought in yet, EUR/USD sitting near two-month highs shows the euro's own strength is still winning out. Friday's jobs number will say a lot about whether that changes.

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 August 6, 2026  |  This report is for informational purposes only and does not constitute financial advice. © 2026 Followme News

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