The Federal Reserve is heading into its September meeting with a difficult problem: the economic signals are not all pointing in the same direction.

Inflation remains well above the Fed's 2% target, which argues for keeping monetary policy tight. But recent employment data have shown signs of weakness, making additional rate increases more complicated.

Now, two major reports are coming before the Fed's next meeting on September 15-16: the August jobs report this Friday and the August inflation report next week. Both could influence what the Fed decides to do. See the Federal Reserve's 2026 meeting calendar.

Inflation Is Still a Problem

Federal Reserve Chairman Kevin Warsh made that clear during his recent speech at the Jackson Hole Economic Policy Symposium.

Warsh reiterated that the Fed's 2% inflation objective is a "firm, fixed target" and said inflation should be the Fed's predominant focus right now.

The latest numbers help explain his concern.

The Fed's preferred inflation gauge, the Personal Consumption Expenditures price index, rose 3.7% over the 12 months ending in July, while core PCE inflation, which excludes food and energy, rose 3.3%.

That leaves inflation well above where the Fed wants it.

And policymakers were already divided over what to do.

At its July meeting, the Fed kept its target interest rate at 3.5% to 3.75%, but three officials voted instead for a quarter-point rate increase.

But Jobs Could Complicate the Picture

Inflation is only one part of the Fed's mandate. Policymakers are also responsible for supporting maximum employment.

And the recent employment numbers have been less reassuring.

U.S. nonfarm payrolls declined by 23,000 in July, compared with an average monthly increase of just 34,000 over the previous 12 months. The unemployment rate was 4.1%, while May and June payroll growth was revised down by a combined 103,000 jobs.

That puts additional attention on the next jobs report.

The government will release the August employment report Friday, September 4, followed by the August Consumer Price Index on September 11, just days before the Fed meets.

A strong jobs report could give the Fed more confidence that the economy can handle tighter policy.

A weak report could make another rate increase harder to justify.

And if the next inflation report shows that price pressures remain elevated, policymakers could find themselves caught directly between those two concerns.

The G20 Put Debt Back in Focus

The Fed's decision is also happening against a much larger debt backdrop.

At this week's G20 meeting of finance ministers and central bank governors in Asheville, Treasury Secretary Scott Bessent said the world is carrying a "mountain of debt" and argued that stronger economic growth is key to making those debt burdens more manageable. Sovereign debt and global economic imbalances were also among the issues discussed at the meeting.

That concern hits particularly close to home in the United States, where federal debt has now crossed $40 trillion.

This is not part of the Fed's official mandate, which focuses on inflation and employment. But it illustrates one of the broader consequences of keeping interest rates elevated: borrowing becomes more expensive not only for households and businesses, but for the federal government as well.

So What Does the Fed Do?

That brings us back to the September meeting.

The Fed essentially faces three paths:

• Raise rates: That could put additional pressure on inflation but could also increase borrowing costs and place more strain on parts of the economy already showing signs of weakness.
• Hold rates steady: That gives policymakers more time to evaluate the economy, but inflation could remain stubbornly above target.
• Cut rates: That could provide support if economic conditions weaken materially, but it becomes more difficult while inflation remains elevated.

What Could This Mean for Gold?

Gold can react quickly when expectations for interest rates change.

Higher rates can increase the opportunity cost of holding an asset that does not pay interest, while changes in the U.S. dollar can also influence gold prices. But the World Gold Council notes that interest rates and the dollar are important drivers of gold, not the only ones.

That distinction matters in the current environment.

Investors are not only watching the Fed. They are also watching persistent inflation, rising government debt, currency volatility, geopolitical uncertainty and central-bank demand for gold.

Central banks and other official institutions added a net 289 metric tons of gold to their reserves during the second quarter of 2026, according to the World Gold Council. That was 62% more than during the second quarter of 2025.

None of this means gold will rise because of a particular Fed decision. Precious metals can move in either direction, especially as markets react to new economic data.

But the Fed's difficult position helps explain why gold remains part of the conversation.

Inflation is still too high. Parts of the labor market are showing weakness. Federal debt continues to grow. And central banks around the world are confronting their own challenges with rates, currencies and inflation, and continuing to use gold as a hedge. 

The next two weeks may tell us more about what the Fed chooses to do.

For long-term investors, however, the bigger question may be whether their savings are diversified enough to prepare for more than one possible outcome. 

If you're considering whether physical gold or silver could play a role in your long-term financial strategy, Lear Capital can help you understand your options. Call us today at 855-271-2873 to speak with a precious metals specialist and learn more.