CIBC Research previews the September FOMC decision.

"The Fed simply can’t wait on the sidelines, and it’s not because core CPI was one tick higher than expected. Failing to at least begin nudging the fed funds rate higher would raise two risks that exceed the risks to the economy from a higher policy rate. For one, long term interest rates that feed into mortgages could end up spiking even further if the Fed seems unwilling to lean against inflation. If the bond market didn’t do that immediately, upcoming increases in headline CPI could do so by adding to inflation expectations," CIBC notes.

"The doves on the Fed have likely flipped over in the face of climbing bond yields, a strong jobs report, a slight uptick in core CPI and, importantly, an escalation in oil prices without much assurance on when that might end. Warsh cannot allow himself to be in a minority dissenting camp in such an early vote in his role as Chair, and his last speech opened the door for him to vote for a hike if that was the sentiment of the committee," CIBC adds.