Fed Officials Don’t Think They’re Done Hiking Interest Rates

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The Federal Reserve’s policy committee does not expect its September rate hike to be the last one. Alongside a unanimous quarter-point increase that lifted the federal funds target range to 3.75% to 4%, Fed officials released economic projections showing the median policymaker expects one more quarter-point hike before the end of the year. In June, the median had pointed to a single quarter-point hike for the year. The September move was the Fed’s first rate increase since 2023.

For anyone tracking the timing, the Fed releases its rate decision as a written statement at 2:00 p.m. Eastern Time on the final day of a Federal Open Market Committee (FOMC) meeting. The chair’s press conference follows at 2:30 p.m. ET. At four meetings a year, including September, the committee also publishes its Summary of Economic Projections at 2:00 p.m., and that release contains the “dot plot” behind the headline about more hikes.

What the September FOMC Decision Did

The FOMC voted unanimously to raise its benchmark rate by 0.25 percentage point, from a range of 3.5% to 3.75% to a range of 3.75% to 4%. That is the highest level since December 2025. It also reversed direction after three rate cuts late in 2025 had brought the range down to where it sat until this meeting.

The fed funds rate is the Fed’s main monetary policy tool. It is the rate banks charge each other for overnight loans, and changes to it feed into borrowing costs on credit cards, adjustable-rate loans, business credit lines and other short-term debt. The Fed uses it to pursue its dual mandate of stable prices and maximum employment. Raising it is meant to make borrowing more expensive, cool spending and investment, and bring demand back in line with what the economy can supply.

The reason for tightening now is inflation that has stayed above the Fed’s 2% annual target since 2021. It has recently been pushed higher by a fuel price shock tied to the war involving Iran. The latest Consumer Price Index report showed inflation still running well above target in August. For the longer history behind that target miss, see U.S. inflation rate by year.

Officials have shown little worry that a quarter-point increase will push unemployment sharply higher. Joblessness has been running near historic lows, which gives the committee room to lean against inflation without, in its own assessment, risking a serious rise in layoffs.

An example of what a quarter point means

Hypothetical: a borrower carries a $10,000 balance on a variable-rate line of credit that resets with the prime rate, and the lender passes through the full 0.25 percentage point increase. Annual interest rises by $25 ($10,000 × 0.0025), assuming the balance stays constant for the year. A second quarter-point hike would add another $25 on the same assumptions. Fixed-rate loans already on the books do not change. New fixed-rate borrowing is priced off market rates, which may move before or after the Fed acts.

What the Dot Plot Says About More Hikes

The headline that Fed officials don’t think they’re done comes from the dot plot, a chart in the Summary of Economic Projections. Each participant places a dot showing where they think the fed funds rate should be at the end of the current year and the next few years.

In September:

• The median projection implies one more quarter-point hike before year-end. That is a higher path than in June, when the median penciled in a single quarter-point hike for the year.
• Four of the 18 officials who submitted projections expect two further hikes by the end of the year.
• Eight expect two more hikes by 2027.

Only 18 dots appear even though the committee has 19 participants (the seven Board governors and the 12 regional Reserve Bank presidents). Chair Kevin Warsh is skeptical of the dot plot and has declined to submit a forecast of his own. So the median reflects the 18 other officials. The chair, who sets the agenda and shapes the committee’s consensus, has not put his own projected path on the chart.

With two meetings left in 2026, one in late October (just before the midterm elections) and one in early December, the median suggests a hike at one of them. It does not say which. Officials who see two more hikes this year would, on that view, favor moving at both.

How to Read the Dot Plot Without Over-Reading It

The dot plot is a set of individual forecasts. It is not a promise or a committee decision. Each dot reflects what one official thinks appropriate policy will be if the economy evolves the way that official expects. When inflation, jobs or energy prices surprise, the dots move. The jump from June’s projections to September’s shows how quickly they can change.

Three points make the chart more useful:

The median gets the headlines, but the spread matters. The median shows the middle-of-the-road view. Ahead of the meeting, BMO Capital Markets’ Ian Lyngen noted that it would be just as important to see whether the dots revealed an “increasingly polarized” committee split into two clear camps. A tight cluster around the median signals broad agreement. Two separated groups make the next decision harder to predict, because the outcome may depend on which camp the chair sides with.

Participants and voters are not the same group. All 19 participants submit projections, but only 12 vote on policy in a given year: the seven governors, the president of the New York Fed, and four other Reserve Bank presidents on a rotating basis. A dot from a non-voting president shows that official’s view but carries no vote that year.

The chair’s view is missing from the chart. Because Warsh does not submit a dot, his statements at the press conference carry extra weight in judging whether the median path is likely.

Why Officials Expect More Tightening

Several pieces of evidence explain why the committee raised its projected path rather than treating September as a one-off adjustment.

Inflation that has not come down

Inflation has been above 2% for roughly five years. Before the meeting, Moody’s Analytics chief economist Mark Zandi described it as running above 3%. The August CPI report showed little relief. Many economists viewed that report as the data point that settled the case for a September hike, although Warsh pushed back on that reading, as covered below.

Energy and supply shocks

Oil and fuel prices spiked in the weeks before the meeting as hopes for a quick end to the Iran war faded. Record-high diesel prices raised concern that energy costs would spread into the prices of other goods, since diesel moves freight. In early September, the decision had been seen as a toss-up. The fuel shock and the CPI report shifted futures pricing heavily toward a hike, with traders also pricing in more increases in the months ahead.

A resilient economy

Two reports released the morning of the decision pointed the same way:

• Retail sales rose 1.2% in August, according to the Census Bureau, rebounding from a downwardly revised 0.5% decline in July. Gas station sales led all categories with a 3.1% increase, reflecting higher fuel prices rather than more gallons necessarily being bought.
• Import prices rose 0.7% in August after falling 0.3% in July, according to the Bureau of Labor Statistics, adding to evidence of inflation pressure coming from abroad.

Along with a strong payrolls report, these numbers suggested that consumers keep spending even while unhappy about higher prices. TradeStation’s David Russell called the data “hawkish,” arguing that higher prices were not yet doing much damage to the economy. A strong economy cuts both ways for the Fed. Demand may still be strong enough to sustain inflation, and the economy may be sturdy enough to absorb further hikes without a jump in unemployment.

What the FOMC statement said

The committee’s written statement broadened a previous reference to the war in the Middle East so that it now covers multiple conflicts around the world pushing up fuel prices. It noted that “uncertainty remains elevated owing, in part, to geopolitical developments,” but that “domestic spending has been resilient.” It also restated the goal directly, saying the policy action “will support a timelier return to the Committee’s 2% goal.”

How Warsh Framed the Decision

The press conference at 2:30 p.m. ET is where the chair explains the reasoning the statement compresses into a few paragraphs. Warsh’s answers in September offer clues about how future decisions will be made.

Trends over single data points

Warsh played down the idea that the August CPI report forced the hike. He repeated a theme from his Jackson Hole speech over the summer: decisions will not hinge on any one release. “Trends matter. Data points are noisy,” he said, and he called “data point dependence” a “dangerous preoccupation.” He added that markets will come to understand over time how this Fed makes its decisions.

For anyone trying to anticipate the October or December meeting, this matters. If the chair means what he says, one soft or hot inflation report is less likely to swing the outcome on its own than a sustained run of data in the same direction.

Markets did not make the decision

Before the meeting, some economists argued the Fed might hike partly to protect its credibility. If investors came to doubt that the Fed would raise rates to fight inflation, they could demand higher yields on Treasury bonds, tightening financial conditions further at a time when yields were already at multi-year highs. Warsh said he pays attention to markets but that the decision rested on the committee’s own assessment. “Sometimes the market tries to prejudge our outcomes,” he said. “But today was our decision.”

What the Fed can and cannot control

Asked whether interest rates can address inflation driven by supply disruptions, Warsh conceded the limits. The Fed cannot affect any individual price, he said, whether oil or groceries. What it can do is make sure changes in relative prices “don’t broaden out” into second- and third-order effects across the economy. In practice, that means the Fed is not trying to lower gasoline prices. It is trying to keep a gasoline price shock from turning into wage demands, higher service prices and expectations of permanently higher inflation.

Independence and the White House

Warsh declined to answer a question about how President Donald Trump, who appointed him and has repeatedly demanded rate cuts, might react to a hike. His predecessor Jerome Powell’s tenure was marked by open conflict with the White House as Trump pressed for cuts and sought more control over the central bank. Warsh said independence is “a two-way street”: the Fed stays in its lane, and those responsible for trade and fiscal policy stay in theirs. The split between the central bank’s tools and the government’s is covered in monetary policy vs. fiscal policy.

Can Rate Hikes Fix This Kind of Inflation?

The Fed cannot reopen shipping through the Strait of Hormuz and cannot remove tariffs. Both have contributed to recent price pressure. That has led some economists to question whether the standard playbook will work.

The mechanism is indirect. Higher short-term rates raise borrowing costs throughout the economy, which discourages borrowing and spending and slows demand until it rebalances with supply. When inflation comes from too much demand, that is a direct fix. When it comes from a supply shock, higher rates do nothing to increase the supply of oil. They work only by reducing demand elsewhere enough to offset the shock and by keeping inflation expectations anchored.

Zandi framed the cost bluntly: to bring inflation down faster, the Fed has to push growth below its potential, and that is hard to do without layoffs, rising unemployment and the risk of a self-reinforcing downturn. That is the trade-off behind the dot plot. Officials projecting further hikes are betting that a resilient labor market can absorb tighter policy. Those projecting fewer are weighing the risk that hikes aimed at a supply problem end up hurting employment.

What a New Hiking Cycle Can Mean for Bonds and Stocks

Many Fed watchers treat September as the start of a hiking cycle rather than a single move. History offers some guide to what follows, with the usual caution that past cycles began under different conditions.

Treasury yields

A Deutsche Bank report published before the meeting found that 10-year Treasury yields have risen by an average of about 1.14 percentage points one year after the start of a hiking cycle. The bank also noted that yields were already starting from a high level this time, which could make the eventual rise more modest than the historical average. Higher long-term yields matter beyond the bond market: they influence mortgage rates and other long-term borrowing costs, which the fed funds rate does not set directly.

Stocks

LPL Financial chief equity strategist Jeff Buchbinder found that in past rate-increase cycles, the S&P 500 posted negative returns in the first four months after the initial hike. Performance tended to improve with time: average 12-month returns after the start of a cycle were nearly 7%, with a median gain near 11%. Those are averages across cycles, not a forecast for this one. The current level of the index is tracked on the S&P 500 page.

When the Fed Releases Its Rate Decision

The schedule is predictable, which helps when planning around a decision day.

The meeting. The FOMC holds eight regularly scheduled meetings a year, most of them over two days. The schedule is published well in advance. The committee can also hold unscheduled meetings when conditions require.

The statement: 2:00 p.m. ET. The policy decision is released as a written statement at 2:00 p.m. Eastern on the final meeting day. It gives the new target range, the vote, any dissents and a short assessment of the economy. Wording changes from one statement to the next, such as September’s broadened reference to global conflicts, are often read as signals.

The projections: 2:00 p.m. ET, four times a year. At the March, June, September and December meetings, the Summary of Economic Projections comes out with the statement. It includes officials’ forecasts for growth, unemployment and inflation along with the dot plot.

The press conference: 2:30 p.m. ET. The chair takes questions half an hour after the statement. This is where context like Warsh’s “trends matter” framing comes out.

The minutes: three weeks later. A detailed summary of the committee’s discussion is published three weeks after each meeting, also at 2:00 p.m. ET. The minutes often reveal how broad support was for a decision and what alternatives officials discussed.

The next scheduled meetings in 2026 are in late October and early December. The December meeting will bring a fresh dot plot, the next chance to see whether officials still expect more hikes.

How the Fed Got Here

The September hike followed a long pause. After three cuts late in 2025, the fed funds range had held at 3.5% to 3.75% since December. At the late-July meeting, the committee kept that range unchanged, a widely expected outcome, but three officials dissented in favor of raising rates. Those dissents were an early sign that pressure for tightening was building inside the committee before the August data and the fuel price spike made the case stronger.

Seen in that light, September was the moment a minority view became the consensus. The dot plot shows that a sizable group of officials, eight of 18, already expects at least two more increases by 2027.

FAQs

The Bottom Line

Borrowers with credit cards, adjustable-rate loans or business credit lines face rising costs if the Fed follows its median path at the October or December meeting. Warsh has said trends will drive decisions more than any single report, so a sustained run of inflation data matters most. The December dot plot will show whether officials still expect further tightening.