New Survey Finds Former Fed Officials Favoring Target Interest Rate Increase

Former Federal Reserve officials believe the U.S. central bank should raise the target fed funds interest rate at its September 15-16 policy meeting, according to a survey conducted ahead of the central bank gathering. Among 32 former governors, regional bank presidents and staff who responded to the September survey of ex-central bank officials, 29 people said the Fed should raise the fed funds rate this week. One person said the Fed should hold; two didn’t answer the question. 

“I am no longer confident that PCE inflation will return to 2% in the next year or two without the Fed raising interest rates,” one survey participant said. “Above all, the upside risks to the inflation outlook have worsened since July: energy prices have not reversed as expected, tariff pass-through continues, and the AI build-out is adding to price pressures.” 

Several people said the central bank’s reputation is at stake with the decision it faces this week about whether to raise the fed funds rate or hold it steady. Fed Chairman Kevin Warsh in August assured the public he will get inflation down, but the evidence of a slowdown in consumer price increases is mixed at best. The Fed’s traditional response when inflation is high is to raise interest rates to restrain consumer demand and rebalance supply and demand conditions in the economy.

“The Fed and new chair's credibility is on the line,” one person said. 

Former Fed officials and staff members participated in the survey between Sept. 4 and Sept. 11. Participants included five former Fed board governors, six former regional bank presidents, 21 former staff at the board and banks. Some former officials didn't answer every question. 

The survey is conducted by Jon Hilsenrath, a former Wall Street Journal economics writer and Visiting Scholar at Duke, in partnership with the Duke University Department of Economics. Surveys are conducted ahead of the Fed’s quarterly update of its own economic and interest projections, which it calls the “Summary of Economic Projections.” Former officials are granted anonymity to encourage participation and frank commentary.

The Fed’s Summary of Economic Projections provides estimates of inflation, unemployment, and economic output, in addition to estimates of interest rates that officials expect to be appropriate. The interest rate estimates, also known as the “dot plot,” are closely watched on Wall Street for insight into the central bank’s thinking and plans.

The survey showed no improvement in the inflation outlook. The median inflation estimate among former officials for 2026 rose a notch to 3.6%, from the 3.5% median they registered in June, while their core PCE inflation estimates rose a notch to 3.3% from the 3.2% inflation rates they projected in June. Inflation estimates for 2027 and 2028 were revised higher by former officials, and some pointed to risks that inflation could go higher still. 

“Earlier in the year, it appeared that there was some hope that inflation would decline closer to its 2 percent target within a year or two. That now appears less likely,” one person said. “While some of the effects of tariffs and war-induced shortages may manifest as price-level effects, with temporary inflation consequences, it's hard to have much confidence in that. Thus, a more sustained increase in inflation is quite possible.” 

The group didn’t think large increases in interest rates will be necessary to tackle the inflation challenge. The median estimate for the rate at year-end was between 4% and 4.25%, which would amount to two quarter-percentage-point increases this year. The median estimate for the policy rate remained just above 4% in 2027, and returned to its current setting, just above 3.5%, by 2028. No person in the survey said a reduction in interest rates was warranted. 

When asked to describe alternate scenarios for the economy, a large number of people cited a risk that inflation will end up even higher than they already estimated. People also cited concerns about rising long-term U.S. Treasury debt yields and deficit sustainability, and uncertainty about developments in the Middle East and about investment patterns in artificial intelligence. 

Former officials and staff pushed back on Chair Warsh’s calls to limit the Fed’s public disclosures about the economic and policy outlook. Many said the central bank needed to communicate more, or more clearly. This included calls for more disclosure about the Fed’s “reaction function” — how it responds to different economic outcomes — and more discussion of alternate economic scenarios. In all, 23 former officials called for the Fed to take steps toward increasing transparency and disclosure, while five supported steps to reduce disclosures. 

“The Fed needs to settle on a communications strategy that includes a reasonable amount of forward guidance on interest rates, and it should do so fairly soon,” one person said. “At present, the markets and the public are understandably a bit confused about what the Fed intends to communicate and how.” 

View the complete September survey report, with detailed commentary from participants. Interested in receiving future releases from the survey? Join the mailing list.

This release was prepared by Jon Hilsenrath, visiting scholar at Duke University, and Anusha Bansal, research assistant.