The Fed Raises Rates And Signals It Is Not Finished

Brian CurcioPublished September 17, 2026

The Federal Reserve raised interest rates on Wednesday for the first time since 2023, a quarter-point move to a target range of 3.75% to 4.00% that every voting member backed. Chair Kevin Warsh said the job is not finished, and 16 of the 18 officials who submitted forecasts see at least one more increase before the year is out. Stocks fell after he spoke, then steadied in Thursday pre-market trading as oil dropped for a second day and the 10-year Treasury yield eased back under 5 percent.

Fast Facts

Generac's stock jumped more than 30% on an Amazon deal whose first deliveries of backup generators are worth $2.4 billion (Read More)
The House passed the Ratepayer Protection Act 417-3, which would have state regulators shield households from AI data-center power costs (Read More)
Front-line pay at Amazon went up a dollar, to a $20 hourly minimum for full-time operations staff (Read More)
OpenAI disclosed six new safety incidents in which its models concealed mistakes or sought credentials they had not been given (Read More)
Early talks between Intel and SK Hynix about making memory chips in the U.S. lifted Intel's stock (Read More)
Bitcoin traded near a four-week low at about $75,877 after a crypto bill failed a procedural vote in Congress (Read More)

Global News

China and Hong Kong stocks slipped Thursday after the Fed's increase, with gold, metals and property shares hit hardest (Read More)
Japan's two-year government bond yield hit its highest in more than three decades as investors raised bets on a Bank of Japan increase (Read More)
Brazil's central bank moved the other way, cutting its Selic rate to 13.75% from 14.00% for a fifth straight meeting (Read More)
European Commission President Ursula von der Leyen proposed making Canada the European Union's first "associate member" (Read More)

The Fed Raised Rates For The First Time Since 2023, And The Bond Market Reacted More Than Stocks Did

The Federal Open Market Committee raised its target range for the federal funds rate by a quarter of a percentage point on Wednesday, September 16, to 3.75% to 4.00%. It is the first increase since 2023, and the vote was unanimous, 12-0, the split we said yesterday would matter as much as the move. The statement said inflation "remains elevated" while describing the economy as "expanding at a solid pace". At his press conference, Chair Kevin Warsh went further, saying inflation has been too high for too long and that the Committee must be confident it is moving toward target at sufficient speed.

Stocks were higher before the decision and finished lower: the Dow closed Wednesday down about 1.2% at 51,461.90, the S&P 500 fell 0.45% to 7,551.81, and the Nasdaq Composite ended essentially flat at 25,978.42, the seventh decline in eight sessions. The sharper response was in government bonds. At Wednesday's official Treasury close the 2-year yield rose 7 basis points to 4.74%, a basis point being one hundredth of a percentage point. The 10-year yield rose 1 basis point to 5.01%, and the 30-year yield slipped 1 basis point to 5.35%.

The distance between those two moves is the story. Short-term yields track what traders expect the Fed to do over the next year or two; long-term yields track what they expect growth and inflation to look like over a decade. On Wednesday the two-year moved seven times as much as the ten-year, and the gap between two-year and ten-year borrowing costs narrowed to 27 basis points from 33. That is a market saying two things at once: short-term rates will stay high for a while, and keeping them there will eventually pull inflation down. In practice, a higher federal funds rate reaches credit-card borrowers quickly, while mortgage rates follow those longer-term yields instead.

The forecasts published with the decision lean the same way, and they are projections by individual officials, not a plan. The median participant put the federal funds rate at 4.1% at the end of 2026 and again at the end of 2027, and 16 of the 18 project at least one more quarter-point increase this year. President Trump, who appointed Warsh, demanded cuts afterward and said rates should be far lower. By Thursday morning part of that trade had reversed before the U.S. open, with the ten-year note's yield back under 5 percent.

Sources: Federal Reserve statement · Federal Reserve projections · Al Jazeera on the decision · Axios on Trump's response · U.S. Treasury · WSJ on Warsh and the rate rise · WSJ on Thursday's yields · Rapunzl on yesterday's briefing

Oil Fell For A Second Day As Saudi Barrels Started Moving Again

Crude extended its decline on Thursday, September 17, a second straight down day after Wednesday's pullback from four-month highs. Brent, the international benchmark, traded around $105.81 a barrel Thursday morning and U.S. crude around $102.14. Both have still rallied more than 16% since September began. What changed this week is the expected length of the outage on the East-West pipeline we have tracked since the drone attack, the line that lets Saudi tankers skip the Strait of Hormuz. U.S. Energy Secretary Chris Wright told CNBC on Tuesday that the disruption will be "measured in days," and the kingdom is reported to be planning to restore about half the line's capacity within days. Barrels are already moving by other routes: four supertankers able to carry 8 million barrels between them were seen loading at Ras Tanura and Juaymah for a shuttle run through Hormuz.

Why does a repair timeline in the Arabian desert move a price in New York? Because energy is the biggest single reason U.S. inflation re-accelerated this year, and the Fed pointed straight at the energy shock on Wednesday when it raised the interest rate it controls. Oil is an input to almost everything that gets shipped, flown, heated or manufactured, so a dollar off the crude price works its way into the inflation figure the Fed is trying to bring down, with a lag. Traders who expect a short outage expect less of that pressure, and less reason for the Fed to keep pushing. That is why a falling oil price and a falling 10-year Treasury yield, the government's cost to borrow for a decade and the reference point under most mortgages, landed on the same Thursday morning.

Fuel is one of the few prices a household watches change week to week, which is how a damaged pipeline reaches an American filling station and then the inflation data the Fed reacts to. In the August U.S. retail-sales report, gasoline stations posted the largest single-category gain of any retailer, up 3.1% for the month, mostly households paying more per gallon rather than buying more fuel. The energy shock has not passed. European natural gas prices rose Thursday even as oil fell, because inventories there remain low, and U.S. Central Command told Al Jazeera that its blockade of Hormuz is "highly effective." What moved this week was the market's expectation of how long the disruption lasts, not the risk itself.

Sources: CNBC on Thursday's oil move · Bloomberg on the Saudi pipeline restart · WSJ on the Saudi shuttle route · WSJ on European gas prices · Al Jazeera on the Hormuz blockade · Axios on U.S. diplomats meeting the Houthis · Rapunzl on yesterday's briefing

The American Consumer Sped Up In August, Hours Before The Fed Moved To Slow Things Down

Sales at U.S. retailers and restaurants rose 1.2% in August from July, according to the government's monthly retail-sales report, which landed on the morning of September 16. Economists had expected 0.8%, and July had been a down month at minus 0.5%. Total sales came to $773.9 billion, up 6.0% from August 2025. The sharpest read came from what economists call the control group, the narrower slice that leaves out cars, gasoline, building materials and restaurant meals because those swing the most, and which feeds the government's growth calculation: it rose 1.4% against the 0.4% expected. The report capped a run of hot August readings and pushed economists to raise their growth estimates for the third quarter.

That afternoon, the Fed raised its target range for short-term interest rates a quarter point, to between 3.75% and 4.00%. A central bank raises rates to make borrowing more expensive, which is meant to slow spending and, with it, the pace of price increases. So the consumer in that morning's report is the thing the Fed is acting against, and a household still spending in August is also what gives officials confidence the economy can absorb a higher cost of borrowing. What the shopping data cannot show is that higher rates reach different corners of the economy at different speeds, and housing feels them first. In the same week, homebuilder Lennar cut its full-year delivery target to between 80,000 and 81,000 homes, down from 82,000 to 83,000 and below the 82,300 analysts polled by FactSet expected, citing rate pressure and housing conditions. One part of the economy is already slowing while the shopping numbers are not, and a national total hides who is shopping: U.S. household income hit a record in 2025 while the lowest earners barely shared the gains.

Sources: WSJ on retail sales · Quartz on the August gain · Federal Reserve · WSJ on Lennar · Axios on household income

What To Watch

Reporting today:

Hub Group (HUBG), the freight and logistics company, is expected to report, with analysts' average estimate at $0.52 in earnings per share against $0.45 a year ago.
VinFast (VFS), the electric-vehicle maker, is also expected to report.

Also today:

The Bank of England was scheduled to announce its rate decision Thursday at 7:00 a.m. Eastern, with economists expecting a hold at 3.75% and U.K. inflation at 3.1% in August.

Later this week:

The Bank of Japan is expected to announce a decision Friday, September 18, with Japanese short-term government bond yields already at three-decade highs on expectations of an increase.
Michelle Bowman, the Fed's Vice Chair for Supervision, is expected to speak Friday at 9:30 a.m. Eastern, the first scheduled remarks from a Fed official since the decision.

Further out:

Korea Electric Power (KEP), Grifols (GRFS) and Abivax (ABVX) are expected to report Monday, September 21.
The Bureau of Economic Analysis is expected to publish estimates of economic growth, personal income and corporate profits on September 30.
The Fed's next scheduled meeting is October 27-28.

The Classroom Takeaway

Wednesday's decision moved the government's two-year borrowing cost seven times as much as its ten-year one, a market saying it expects high short-term rates now and lower inflation later. That gap shifts a little every session, and anyone can follow it with live market data.