Federal Reserve interest rate decision on Wednesday: Counterstrike against the inflation bogeyman
Summary
- The US Federal Reserve is expected to announce an interest rate hike on Wednesday, likely raising the policy rate to the 3.75–4.00% range, as indicated by futures market pricing.
- Fed Chair Kevin Warsh has not provided clear guidance, but persistent inflation and high oil prices suggest a rate increase is imminent, despite political sensitivities with President Trump.
- Recent economic data shows core inflation rose by 0.3% in August, exceeding expectations, while oil prices have surged above one hundred dollars, intensifying inflationary pressures.
- Several Fed policymakers, including three regional bank presidents, have expressed the need for disinflation signs to maintain current interest rates, but such signs remain limited.
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Automatic translation: Originally published in Finnish 15/09/2026, 05:01 GMT. Give feedback here.
The US central bank, the Federal Reserve, will announce its interest rate decision on Wednesday. A rate hike is already nearly certain, as also reflected in futures market pricing, which would bring the policy rate to the 3.75–4.00% range. Signs of further tightening add interest, and the updated economic estimates will also provide tidbits of information on the state of the US economy.
Federal funds futures
Source: LSEG
Fed Chair Kevin Warsh has repeatedly avoided giving clear guidance, but persistently high inflation, oil at one hundred dollars, and his own emphasis on the importance of price stability are factors that strongly point toward a rate hike. However, the situation is politically fragile: President Trump appointed Warsh expecting interest rate cuts, but has not yet blamed him for the failure to achieve that goal. Apparently, a sort of "honeymoon" is still underway, during which the White House's treasure trove of words remains shut.
Just a week ago, the interest rate outlook was less clear. Some central bankers, such as Fed Governor Christopher Waller and New York Fed President John Williams, pointed to summer's cooling inflation figures as a sign of progress toward the 2% target. However, core inflation in August rose by 0.3% month-on-month, which was higher than expected. At the same time, oil prices have risen above one hundred dollars amid the escalating situation in the Middle East, which is also fueling inflationary pressures. I am also eagerly awaiting the economic estimates, which may see upward revisions regarding prices.
Already in July, three regional bank presidents dissented in favor of a rate hike, and several other policymakers have stated they will soon need to see signs of disinflation to warrant keeping interest rates at their current level. Today, such signs are very scarce.
