Macro Insights Flash Macro: U.S. FOMC September 2026

KKR argues that persistent nominal growth, inflation and fiscal pressure will keep U.S. interest rates higher for longer than the Federal Reserve and markets currently expect.

• The Fed raised rates by 25 basis points in September 2026, but KKR views this as normalization of earlier emergency cuts rather than a 2021-style tightening cycle.
• KKR expects two further hikes, in December and March, taking the policy rate to 4.375%, versus the FOMC’s expectation of only one more hike.
• KKR now expects rates to remain at 4.375% through early 2029, compared with 2028 previously, because the Fed does not expect inflation to return fully to target until 2029.
• Core PCE inflation is forecast above 2% through 2029, including 2.2% in 2028, while KKR’s framework attributes durable nominal growth to fiscal deficits, aging demographics, geopolitics and the energy transition.
• KKR raised its 10-year Treasury yield targets to 5.1% at year-end 2026 from 5.0% and 4.9% at year-end 2027 from 4.7%, citing persistent term-premium pressure from fiscal deficits, capital competition and AI investment.

Takeaway: Investors should prepare for a structurally higher-rate regime, with 10-year yields in a roughly 4% to low-5% range and positive real policy rates, favoring infrastructure, asset-based finance, opportunistic credit and operationally driven buyouts while recognizing that a move toward materially tighter policy would require core inflation to remain sustainably above 3%.