MNI Fed Review - Sep 2026: “Firm” Hike, With More To Come

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EXECUTIVE SUMMARY:

• The FOMC delivered a first rate hike since 2023 at its September meeting, with a unanimously-agreed 25bp increase in the Fed funds range to 3.75-4.00% accompanied by a more hawkish than expected “higher-for-longer” Dot Plot and economic projections that remained pessimistic on the inflation outlook.
• The suite of communications cemented expectations for at least one more hike this year (32bp priced through December), in line with the 25bp raise now expected by 12 of 18 FOMC members by end-2026 with 4 more seeing a third hike to 4.375%.
• By the end of the meeting, terminal yields had pushed to a cycle high 4.73% (eyeing 3 to 4 more hikes from here).
• Markets now price around 55% probability of a follow-up hike in October, but it remains to be seen what criteria the FOMC will use to weigh up inflation progress to make such a decision by that stage.