FOMC September 2026: Will the Fed Hike Rates?
The Federal Reserve meets September 15-16, and for the first time since 2023, markets think they might raise interest rates. The current rate is 3.50%-3.75%. If they hike 25 basis points, it goes to 3.75%-4.00%. That would be the first rate increase after 18 months of cuts and pauses — and it would move every forex pair, gold, and equity index on the planet.
Why a Hike Is on the Table
Three months ago, nobody expected this. The conversation was about when the Fed would cut rates again. Then three things changed:
- Inflation stopped falling. PCE inflation — the Fed's preferred measure — is at 3.7% over 12 months. But the 6-month annualized rate is 4.1%, which means the recent trend is getting worse. Fed Chair Warsh highlighted this exact comparison at Jackson Hole. In plain English: the yearly number looks stable, but the last six months have been hotter than the year before.
- Iran and energy prices. The ongoing conflict in the Middle East has disrupted shipping through the Strait of Hormuz. Oil ran from $80 to nearly $120 earlier this year. It has pulled back to around $84, but supply chains have not fully recovered. Energy costs feed into everything — freight, packaging, utilities, food. The Fed cannot drill for oil or end a war, but it can make borrowing more expensive to cool demand.
- The July FOMC vote was 9-3. Three Fed governors — Hammack (Cleveland), Kashkari (Minneapolis), and Logan (Dallas) — voted for an immediate hike. That is the most dissenting votes since 1970. When a third of the committee disagrees publicly, it puts enormous pressure on the chair to act.
The Numbers That Matter
| Metric | Current | What It Means |
|---|---|---|
| Fed Funds Rate | 3.50% - 3.75% | The rate banks charge each other for overnight loans — it sets the floor for all borrowing costs |
| PCE Inflation (12-month) | 3.7% | Nearly double the Fed's 2% target — prices are still rising too fast |
| PCE Inflation (6-month) | 4.1% | The recent trend is worse than the yearly number — this is what Warsh is focused on |
| Core PCE (trimmed mean) | 2.3% | Strip out the extremes and inflation looks more contained — the strongest argument for holding |
| Unemployment Rate | 4.1% | Stable — no recession signal, which gives the Fed room to hike |
| July FOMC Vote | 9-3 (hold) | Three dissents in favor of hiking — the most since 1970 |
| Market Hike Probability | ~60% | CME FedWatch and Kalshi both lean toward a hike, but it is not a certainty |
How We Got Here: The Rate Path
What Warsh Said at Jackson Hole
"The Fed's preferred measure of inflation, the 12-month change in the PCE price index, stands at 3.7 percent, while the six-month change is 4.1 percent. While this summer's readings were better than expected, they do not tell me that underlying trends have meaningfully improved."
That single paragraph is why hike odds jumped from 40% to 60% in a week. Warsh is telling you directly: the annual number is misleading. The recent trend is worse. And he is not going to be patient about it.
He also said the 2% PCE target is "firm" and "fixed." That is central-bank speak for "we are not moving the goalposts." If inflation stays above 2%, rates stay high — or go higher.
What to Watch on September 16
The decision comes at 2:00 PM ET. Warsh's press conference starts at 2:30 PM. Three things carry the information:
| Time | What | What to Look For |
|---|---|---|
| 2:00 PM | Statement | Did the target range move? If it goes to 3.75%-4.00%, they hiked. Read the language for clues about December. |
| 2:00 PM | Dot Plot | Each Fed official's rate forecast. In June, 9 of 18 projected at least one hike. If that number grows, expect more hikes. |
| 2:30 PM | Press Conference | Warsh's tone. Does he signal this is a one-and-done hike, or the start of a tightening cycle? That distinction moves markets more than the rate decision itself. |
How FOMC Moves Forex
FOMC is the single biggest market-moving event on the calendar. Bigger than NFP. Bigger than CPI. Here is why: it is not just one data point — it is the Fed's interpretation of all the data, plus their plan for what to do about it.
- EUR/USD: Typically moves 40-80 pips on a rate decision, more if the press conference surprises. A hike = dollar strength = EUR/USD falls. A hold with hawkish language = mixed. A hold with dovish language = dollar weakness = EUR/USD rises.
- Gold (XAU/USD): Moves 30-80 pips on FOMC. A hike pressures gold (higher rates = higher opportunity cost of holding gold). But if the hike comes with language suggesting it is the last one, gold can rally on the "peak rates" narrative.
- USD/JPY: The most volatile major pair on FOMC. Moves 50-100 pips. Japan is still at near-zero rates, so any US rate change widens the yield differential and pushes USD/JPY higher on a hike.
Two Scenarios
Scenario 1: The Fed Hikes 25bps
Rate goes to 3.75%-4.00%. Dollar rallies immediately. EUR/USD drops 40-60 pips. Gold sells off 30-50 pips. The key question is the press conference: if Warsh signals this is a "one and done" to anchor inflation expectations, the dollar rally fades within an hour. If he signals more hikes are possible, the dollar keeps running.
What to do: If you are long USD going in, take partial profits at the initial spike. The press conference often reverses the first move. Set a trailing stop on the remainder.
Scenario 2: The Fed Holds
Rate stays at 3.50%-3.75%. The initial reaction depends entirely on the vote split and the language. If it is another 9-3 with the same three dissents, the dollar barely moves — the market already priced that in. If it is 7-2 or 6-3 with new dissents, the dollar strengthens because a November hike becomes the base case. If the vote is unanimous to hold, the dollar sells off hard because the hike narrative is dead.
What to do: Do not trade the headline. Trade the dot plot and the press conference. The statement alone is not enough information.
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Request Early AccessWhat This Means for Your Trading
Whether the Fed hikes or holds, the September 16 meeting will set the tone for the rest of 2026. Here is how to think about it:
- Before the meeting (Sep 1-15): Reduce position size. FOMC weeks are volatile. The market will chop around as traders reposition based on incoming data (NFP on Sep 4, CPI on Sep 11). Do not get chopped up.
- Day of the meeting (Sep 16): Be flat or very small going into 2:00 PM ET. Spreads widen, liquidity thins, and the initial move can reverse in seconds. Wait for the press conference before committing.
- After the meeting: The trend that forms in the 2-4 hours after the press conference usually lasts 1-2 weeks. That is your trade. Enter on a pullback to the post-FOMC level, not on the initial spike.
The Short Version
- FOMC meets September 15-16 — decision at 2:00 PM ET, press conference at 2:30 PM
- Current rate: 3.50%-3.75%. Markets price ~60% chance of a 25bps hike to 3.75%-4.00%
- Why a hike is on the table: inflation at 3.7% (4.1% over 6 months), Iran energy shocks, 9-3 dissent at July meeting
- Why it might not happen: trimmed mean PCE at 2.3% suggests underlying inflation is contained, labor market cooling
- Watch the dot plot and press conference — they matter more than the rate decision itself
- Typical EUR/USD move on FOMC: 40-80 pips. USD/JPY: 50-100 pips. Gold: 30-80 pips
- Be flat or small going into 2:00 PM. Trade the trend that forms after the press conference, not the initial spike