The Fed faces the music

The Federal Reserve has turned hawkish, making further rate hikes more likely as it responds to persistent inflation and seeks to restore policy credibility.

• On September 16, 2026, the FOMC unanimously raised the federal funds target range by 25 basis points to 3.75%-4.00%.
• Chair Kevin Warsh described the move as removing “a dose of accommodation,” implying that policy remains insufficiently restrictive to bring inflation into line.
• The Summary of Economic Projections put the median year-end target range at 4.00%-4.25%; 12 of 18 participants expected one more quarter-point increase and four expected two, while only two expected no further hike.
• Fed funds futures priced a 50% chance of another 25-basis-point increase in October and a 30% chance of increases at both the October and December meetings.
• The 10-year Treasury yield again breached 5% as Warsh attributed higher yields to faster growth, competition for capital and geopolitical tensions.

Takeaway: Investors should prepare for additional near-term tightening and elevated bond-market yields, although the projections also point to possible rate declines in 2027 and contain some inconsistencies with Warsh’s hawkish messaging.