I. The Fed
Today marked the conclusion of the September 15-16 FOMC meeting. The Fed's monetary policy committee delivered a widely anticipated 25bps increase in the federal funds rate (FFR), raising the target range to 3.75%-4.00%. Here are five key takeaways from today’s decision:
(1) The decision was unanimous. The FOMC voted 12-0 to raise the FFR by 25bps, showing unanimous agreement that tighter monetary policy is warranted. During his press conference today, Fed Chair Kevin Warsh said the vote “shows our resolve to achieve price stability on a timelier basis.” He pointed to three developments since July that brought the Committee together: stronger economic growth, insufficient improvement in inflation, and increased geopolitical risks. We reckon that the re-escalation of the war in the Middle East and the resulting prospect of more inflationary pressures from higher-for-longer oil prices was the deciding factor.
(2) Inflation remains the Fed’s predominant concern. Warsh said “inflation is too high and has been for too long” and that the Fed’s “predominant focus is on the price stability side of our mandate.” He added that this summer’s inflation readings “do not tell me that underlying trends have meaningfully improved,” with several key measures still running above 3.0% y/y. The Summary of Economic Projections (SEP) reinforced that message, with 2026 headline and core PCED forecasts revised slightly higher and inflation not forecast to return fully to the Fed’s target of 2.0% y/y until 2029 (chart).
