Citadel Securities says the Federal Reserve could begin a new rate hiking cycle as soon as September as inflation pressures become more persistent and broad based, according to a Bloomberg report.

Frank Flight, the firm’s head of macro strategy, said oil prices have eased after the US and Iran announced an interim peace deal, but the inflation shock from the conflict has already become more entrenched across the economy.

Flight pointed to easy financial conditions, lingering supply chain disruptions, a reaccelerating labor market and a surge in artificial intelligence investment as forces that could keep price pressures elevated.

The call comes as Fed Chairman Kevin Warsh prepares to lead his first policy meeting on Wednesday. Citadel expects Warsh to take a more hawkish tone, with risks building toward rate increases in September, December and March 2027.

That view is more aggressive than current market pricing. Bloomberg reported that interest rate swaps imply only about a one in three chance of a September hike, even as the swaps curve prices about 21 basis points of hike premium by year end.

Flight said the Fed should move in a clearly hawkish direction and preserve inflation credibility rather than validate the market’s more dovish expectations.

The inflation concern is already showing up in labor and consumer price data, according to the note. Wage growth is accelerating fastest in cyclical industries, while a growing share of consumer price components are rising at an annualized pace above 3%.

At this week’s meeting, the Fed is widely expected to remove any easing bias and signal no cuts this year. Citadel expects a more hawkish set of forecasts, with at least five officials penciling in hikes, core inflation above 3% in 2026 and a slightly lower unemployment rate.

Under a Taylor Rule framework, that mix would point to roughly 75 basis points of policy tightening this year, Flight said. A shift toward a tightening bias as soon as July could set the stage for a September rate hike.