Fed Policy

THE FED HIKED FOR THE FIRST TIME SINCE 2023.
WARSH WON'T SAY WHAT'S NEXT.

MAULER TERMINAL RESEARCH · 2026-09-26 · decision Sept 16, yields as of Sept 25 open · symbols: ZT ZN ZB ES NQ YM
BY RYAN, FRANK & DILLON · MARKET MAULERS FOUNDERS

At Jackson Hole on August 28, Kevin Warsh gave the market a test instead of a forecast. The Fed would act unless it was confident inflation was heading back to target "clearly and at sufficient speed." We wrote at the time that the curve believed him.

Nineteen days later he read out the verdict.

"We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Today the FOMC decided that this standard has not been satisfied."Kevin Warsh · FOMC press conference · Sept 16, 2026

The Fed raised the federal funds target by a quarter point to 3.75-4%. It is the first hike since July 2023, and the first of Warsh's chairmanship. Here is what changed, what the dot plot actually says, how the tape reacted, and what sits on the calendar between now and December.

The Decision, Next To July

July FOMCSeptember FOMC
ActionHoldHike 25bp
Target range3.50-3.75%3.75-4.00%
Vote9-3, three dissents for a hike12-0, unanimous
Balance sheetAmple reservesAmple reserves, unchanged

The vote is the part to notice. In July, three members wanted to hike and lost. Two months later, nobody dissented in either direction. Warsh called that out himself: "The Committee's unanimous vote shows our resolve to achieve price stability on a timelier basis." A 12-0 vote tells you the doves did not fight this one, which makes the next hike easier to deliver.

Nothing changed on the balance sheet. The statement repeats that the Committee is continuing its policy of maintaining ample reserves. All of the tightening this time came through the rate.

Three Lines Worth Keeping

"The plain fact is that inflation is too high and has been for too long."Kevin Warsh · Sept 16, 2026
"Trends matter. Data points are noisy. Data point dependence is a dangerous preoccupation."Kevin Warsh · Sept 16, 2026
"This won't surprise you: I'm not in the forward guidance business."Kevin Warsh · Sept 16, 2026

Read the second and third together. The previous Fed trained a generation of traders to react to every CPI print and then wait for the chair to tell them what it meant. Warsh is saying he will not overreact to one print, and he will not tell you in advance what he plans to do. For anyone trading around macro releases, that removes a layer of hand-holding. Expect the market to do more of its own guessing, and to guess wrong more often.

The Dot Plot, Read Properly

Medians from the Summary of Economic Projections, with June's numbers underneath for comparison.

Median202620272028Longer run
Fed funds rate4.1%4.1%3.9%3.2%
  June3.8%3.6%3.4%3.1%
Core PCE inflation3.4%2.5%2.2%n/a
  June3.3%2.5%2.1%n/a
Unemployment rate4.1%4.1%4.1%4.2%
  June4.3%4.3%4.2%4.2%
Real GDP growth2.3%2.4%2.2%2.0%
  June2.2%2.3%2.2%2.0%
Why the Fed keeps saying 3.4% when CPI says 2.4%. August CPI, released September 11, showed headline at 3.4% and core at just 2.4%, with energy up 16.3% on the year. The Fed does not target CPI. It targets PCE, and its own projection for core PCE this year is 3.4%. We flagged this gap in August: core CPI keeps looking tame while core PCE runs a full point hotter. As long as that holds, "cooling inflation" headlines and a hiking Fed can both be true on the same day.

How The Tape Took It

The two-hour window on September 16 is a clean lesson in where the risk actually sits on Fed day.

Time (ET)What happened
2:00 PMStatement drops. S&P +0.3%, Nasdaq +0.7%, Dow flat. Treasury yields dip across the curve. The hike was expected, so the first read is relief.
2:30 PMPress conference. Warsh leans on "too high for too long" and refuses to guide. The move reverses and the Dow is down more than 700 points at the worst of it.
4:00 PMDow 51,462 (-1.21%) · S&P 500 7,551 (-0.45%) · Nasdaq Composite 25,978 (-0.01%) · 10-year 5.02%

The first move was wrong. Anyone who chased the 2:00 pop got run over by 2:45. Notice also where the damage landed: the Dow took the hit while the Nasdaq Composite finished flat, because a handful of mega-cap names held the tech index up. That is the concentration effect we break down in our piece on the top ten carrying 40% of the S&P.

The bigger story came after. The 10-year was 4.71% on the day of Jackson Hole. By the open on September 25 it was 5.17%, near a 19-year high, and fed funds futures priced about a 66% chance of another hike in October. That is 46 basis points on the 10-year in under a month. The Fed moved the front end by 25. The long end moved nearly twice as far on its own.

Index levels are cash-index closes, not futures settlements, and are not directly comparable to futures prices quoted elsewhere on the site.

The Calendar Into December

DateEventWhy it matters
Wed Sep 30August PCEThe measure the Fed actually targets. Core PCE is the number to watch, not the headline
Early OctSeptember jobs reportUnemployment at 4.1% is what lets them keep hiking. A crack here is the one thing that changes the path
Mid OctSeptember CPIHeadline has been carried by energy. Watch whether core CPI starts catching up to core PCE
Tue-Wed Oct 27-28FOMC, no projectionsMarket is leaning toward a hike. No dot plot, so the statement and press conference carry everything
Tue-Wed Dec 8-9FOMC, with projectionsThe median already calls for one more hike by year end. If October passes, December is where it lands

How We Are Handling It

Key Takeaways

Sources

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