Federal Reserve hikes interest rates for first time since 2023, signals more to come

The Federal Reserve just reversed course. After spending the better part of two years easing monetary policy, the central bank raised the federal funds rate by 25 basis points to a target range of 3.75%-4.00% on September 16, 2026. It’s the first hike since July 2023, and if Fed leadership’s tone is any guide, it probably won’t be the last. What forced the Fed’s hand August 2026’s core CPI came in at 0.29% month-over-month, beating expectations. Producer prices told a similar story, with PPI data reinforcing the case for tighter policy. Retail sales figures added fuel, suggesting consumer demand remains robust enough to keep upward pressure on prices. Geopolitical tensions have compounded the problem by pushing energy prices higher. The Fed’s preferred inflation metrics remain stubbornly above the 2% target. Chair Kevin Warsh telegraphed the move at the Jackson Hole symposium in August, where he delivered a line that markets treated as a policy signal: “Price stability is not self-executing.” By the time the FOMC convened this week, the outcome was all but certain. A Reuters poll found that 86 out of 101 economists predicted the 25 basis point hike. Market-implied probabilities ran...