The Fed Decides Today With The 10-Year Yield At 5%

The Federal Reserve ends its two-day meeting today, and markets are near-certain it will raise interest rates for the first time since 2023, a quarter-point move due at 2:00 p.m. Eastern with Chair Kevin Warsh's press conference at 2:30. The bond market has already moved: the 10-year Treasury yield, the benchmark that sits under most mortgages, closed at 5% on Tuesday, its highest close since 2007. Oil eased from near four-month highs this morning and AI stocks steadied, but the day still rests on what Warsh says this afternoon.

Fast Facts

• New York manufacturing activity slowed sharply in September, with the New York Fed's Empire State index dropping to 7.6 from a four-year high of 20.6 in August (Read More)
• U.S. household income hit a record in 2025, though the lowest earners barely shared in the gains, new Census data showed (Read More)
• Truist agreed to sell $5.5 billion of loans as it exits the near-prime auto-lending business (Read More)
• Federal regulators opened a probe into whether Tesla's steering-wheel-free Cybercab meets vehicle safety standards (Read More)
• NuScale Power moved closer to a deal that could reshape the small modular nuclear reactor industry (Read More)
• A Medicare pilot that uses artificial intelligence to approve care has produced "alarmingly high" denial rates, according to a lawsuit over the program (Read More)

Global News

• U.K. inflation rose to 3.1% in August, its highest since March, keeping pressure on the Bank of England before its rate decision Thursday (Read More)
• European shares held steady as the recent rally in crude oil paused and bond yields eased ahead of the Fed's decision (Read More)
• Grab agreed to buy a 60% stake in SoftBank-backed Atome Financial for about $1.49 billion in cash (Read More)
• A new generation of investors is buying African stocks as the continent prepares its biggest-ever IPO (Read More)

The Fed's Decision Arrives This Afternoon, With The 10-Year Yield Closing At 5%

The Federal Reserve wraps up its two-day meeting this afternoon, and by 2:00 p.m. Eastern we will know whether it has raised interest rates for the first time since 2023. As we noted yesterday, markets have spent this week treating a quarter-point increase as close to a foregone conclusion, a move that would lift the Fed's target range from 3.50% to 3.75% up to 3.75% to 4.00%. Interest-rate futures, which are contracts that let traders bet on where the Fed sets its rate, put the odds near 90%, and a Reuters survey found 86 of 101 economists expecting the same quarter-point step. Still, the increase is expected, not decided, and the announcement is hours away as this posts.

The clearest sign of what traders expect sits in the bond market, where the 10-year Treasury note closed Tuesday at 5.00%, its highest close since 2007. It touched 5.04% during the session before settling back. That is the meeting we wrote about at the start of this week, now showing up in prices, with borrowing costs rising before the Fed has done anything at all. Bonds, in other words, are not waiting for the 2:30 p.m. press conference to move.

The Fed only sets one interest rate directly, the overnight rate that banks charge each other, and the 10-year Treasury yield is not it. That number is set by traders buying and selling government bonds, and when they expect the Fed to keep rates higher for longer, they demand more yield to lend their money out for a decade. Because the 10-year sits underneath most mortgages and much corporate borrowing, a yield near 5% pushes up the cost of credit across the economy before the Fed acts at all, which is why the housing market is now closing in on its highest mortgage rate since January 2025, nearing 7%.

Not everyone thinks a hike is the right call. Some economists warn it could be a mistake if the economy is weaker underneath than the headline numbers suggest, and Chair Kevin Warsh is caught between a market pricing in higher rates and a president who wants cuts. If the committee does raise rates, how the vote splits will matter as much as the move itself, because the number of dissents signals where policy heads next. Warsh drew criticism for a vague July press conference, and his remarks at 2:30 p.m. Eastern are his chance to explain the Fed's thinking.

Sources: Yahoo Finance on the Fed's expected hike · Bloomberg on the 10-year at its highest since 2007 · Nasdaq on the first hike since 2023 · U.S. Treasury · Rapunzl on the meeting opening · Rapunzl on Tuesday's briefing

Oil Eases Before The Fed, But The Fuel Bill Families Have Already Paid Keeps Climbing

Oil edged lower Wednesday morning, slipping from near four-month highs as U.S. crude inventories came in higher than expected and traders positioned ahead of the afternoon's Fed decision. That pullback does not mean the supply scare has passed. The pipeline we have tracked all week, Saudi Arabia's main East-West route to the Red Sea that lets tankers skip the Strait of Hormuz, is still shut after last week's drone attack, and Iran-aligned Houthi forces are pressing new threats near Red Sea shipping lanes. So the price fell on today's inventory number even as the reasons it climbed in the first place have not gone anywhere.

The reason this matters beyond the oil market is the same one that runs through today's Fed story. Oil is a direct input into inflation, feeding into the cost of nearly everything that has to be produced or moved, so even after this week's dip the still-elevated level strengthens the case for the expected hike. When crude sits near recent highs, as it has all week, it pushes on prices across the economy at exactly the moment the central bank is trying to pull inflation down. Fuel is also one of the very few prices a household actually sees change from one week to the next, which is what makes it such a loud signal.

That is where the household number lands. U.S. consumers have spent about $100 billion more on fuel since the Iran war began in late February, according to a Brown University Watson Institute estimate of roughly $100.9 billion, and the national average diesel price hit a fresh record of $6.27 a gallon on Tuesday, per AAA. Diesel is the fuel behind trucking, farming and construction, so its record price quietly feeds into the cost of almost everything that gets delivered to a store shelf. A family that never buys a barrel of crude still pays that bill every time they fill the tank or buy something a truck carried.

Sources: Al Jazeera on the $100 billion in extra fuel costs · WSJ on the record diesel price · Nasdaq on oil pausing before the Fed · Rapunzl on Monday's oil move

Chip And AI Stocks Recovered As Customers Kept Signing Multiyear Deals

After the AI-slowdown scare we covered earlier this week, the trade that had wobbled on Monday steadied and then bounced. On Wednesday, European indexes rose as banks and AI-linked shares clawed back some of the week's losses, and the chip names that led the drop recovered alongside the software stocks that had held up better. What turned the mood was less a headline than a pattern in the paperwork: customers kept signing multiyear contracts for chips, which is not the behavior of buyers who think demand is about to fall off. One analyst summed up the read by saying that "that's not what the front end of a downturn looks like."

Why this matters comes down to what has been driving the market all year. Spending on AI infrastructure, meaning the chips, the data centers, and the power to run them, has been a main engine of the 2026 rally, so whether that spending holds up shapes the direction of the whole market and not just a handful of tickers. The length of those contracts is the tell investors are leaning on right now, because companies do not commit to years-long orders when they expect demand to collapse in a quarter or two. For now, that has led investors to treat last week's drop as money rotating between corners of the AI trade rather than the beginning of a bust, though the same contract signals are what will show whether that read holds.

Sources: MarketWatch on the AI rebound · WSJ on European banks and AI stocks recovering · Yahoo Finance on Big Tech spending and chips · Rapunzl on the AI selloff

What To Watch

The week belongs to the Federal Reserve. Its decision is expected today, September 16, at 2:00 p.m. Eastern, with Chair Kevin Warsh's press conference at 2:30; the target range going in is 3.50% to 3.75%, and market pricing implies roughly a 90% chance of a quarter-point increase. Governor Michelle Bowman is expected to speak Friday, September 18, which could add color on how the committee is thinking.

The Bank of England is expected to hand down its own rate decision Thursday, September 17, a day after the Fed, with U.K. inflation now running at 3.1%.

Earnings are light and housing-heavy. Lennar, the homebuilder, is expected to report after Wednesday's close, a timely read on how a mortgage rate closing in on 7% is landing on housing demand. VinFast, the Vietnamese electric-vehicle maker, and Hub Group, the freight company, are each expected to report Thursday.

Further out, the government's estimates of economic growth, personal income and corporate profits are all expected September 30, the next real test of whether the economy is as sturdy as the case for higher rates assumes.

The Classroom Takeaway

When a single committee's decision can move the cost of a mortgage, a car loan and a credit card all at once, it is worth understanding how the Fed's one rate ripples out across the whole economy. You can sit in the chair yourself and weigh the same trade-offs policymakers face in our Run the Fed simulation.