September 16, 2026 09:00 AM PST
(PenniesToSave.com) – Federal Reserve Chair Kevin Warsh and his colleagues on the Federal Open Market Committee wrap up a two-day policy meeting Wednesday, with a decision on interest rates due at 2 p.m. Eastern [4]. Markets widely expect a quarter-point increase, which would be the central bank’s first rate hike since July 2023 [4][5].
A hike would lift the federal funds target range from its current 3.5% to 3.75% up to 3.75% to 4.00% [4]. Expectations have firmed quickly. After Friday’s inflation report, traders using CME FedWatch put the odds of a hike at 90%, up from 70% the day before [2]. By Monday, those odds had reached 93%, and they stood at 92.7% early Tuesday [4].
An increase is not guaranteed. Warsh has avoided the kind of advance signals his predecessors offered, and at least one prominent columnist predicts the Fed will hold [1][3]. Either way, the stakes reach well beyond Wall Street. The Fed’s benchmark rate influences what households pay on credit card balances, home equity lines, and personal loans, as well as what savers earn on deposits [5]. With consumer prices still rising at a 3.4% annual pace [2], the decision will shape the cost of carrying debt and whether the Fed can restore confidence that inflation is headed lower.
Quick Links
- Why Is the Fed Considering Its First Rate Hike in Three Years?
- What Has Fed Chair Kevin Warsh Signaled So Far?
- Is There a Case for Leaving Rates Where They Are?
- Can the Fed Stay Independent With Elections Seven Weeks Away?
- How Could a Rate Hike Affect Borrowing and Savings?
- What Should Everyone Watch After Wednesday?
Why Is the Fed Considering Its First Rate Hike in Three Years?
Inflation has proven more stubborn than many forecasters expected. The Consumer Price Index rose at a 3.4% annual rate in August, the same pace as July, with prices climbing 0.4% for the month after just 0.1% in July [2]. That remains well above the Fed’s 2% target, even though it is far below the 9.1% peak reached in 2022 [5].
Energy is a major driver. Gasoline prices rose 3.9% in August and accounted for a third of the monthly increase [2]. Compared with a year earlier, gas was up 27%, according to The New Republic’s Timothy Noah [3]. Diesel hit a record $6 a gallon [2], and West Texas Intermediate crude futures reached $103.29 per barrel Monday, a 20% gain for the month so far [4]. The ongoing war with Iran has pushed oil prices higher and is likely to keep inflation elevated for longer [1].
The pressure is not limited to the pump. Computer software and accessory prices jumped 25.4% over the past year, the largest annual increase on record, while computers and smart home assistants cost 8.4% more [2]. Rental cars, vehicle maintenance, day care, preschool, nursing homes, and in-home care all posted strong gains, and Apple announced $100 price increases on older iPhone models, a move CNN tied to rising chip costs driven by AI demand [2]. Olu Sonola, head of U.S. economics at Fitch Ratings, argued that the breadth of these increases makes the report hard to dismiss as simply an energy story [2].
Tariffs and the AI buildout are adding to the strain [5], and the AP reports that surging investment in AI data centers has been accelerating inflation as well [1]. For families, the result is a squeeze, with prices rising faster than paychecks [5]. The University of Michigan’s consumer sentiment gauge fell 7.5% in early September, the second-lowest reading in more than 70 years of records [2]. Persistent inflation quietly erodes savings and fixed incomes, so knowing how to create a budget that accounts for rising costs matters more than ever.
What Has Fed Chair Kevin Warsh Signaled So Far?
Warsh has made clear he prefers minimalist communication [4]. He has resisted the kind of forward guidance markets grew used to under earlier chairs [1], and he did not submit his own interest rate projections in June, even though his colleagues did [5].
Still, his recent remarks point in one direction. Speaking at the Fed’s Jackson Hole symposium on Aug. 28, Warsh described the labor market as stable and said policymakers should stay focused on rising prices [5]. He argued that recent inflation reports did not show improvement in underlying trends and warned that the Fed would need to act if that did not change soon [1]. He has also called price stability his top priority [4].
We have work to do.
Kevin Warsh, Federal Reserve Chair, at Jackson Hole [1]
Several colleagues have been more direct. In July, Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan dissented from the decision to hold rates, preferring a quarter-point increase [4][5]. Hammack wrote on LinkedIn on Sept. 4 that policy is not restrictive and that the time has come to act [5]. Fed Governor Christopher Waller said earlier this month that he would consider a hike if August data failed to show improvement [2].
Outside pressure is building too. JPMorgan Chase economist Michael Feroli wrote that the chair’s repeated warnings on inflation put credibility at risk without action to back them up [1]. In a Duke University survey of former Fed officials, 29 of 32 respondents said the Fed should raise rates this week [4]. Deutsche Bank strategists noted that a hold would be the biggest dovish surprise at a scheduled meeting since 1994, and Kiplinger staff economist David Payne suggested Warsh may have talked himself into a corner [4]. Following through on stated commitments is how any institution earns trust, and the central bank is no exception.
Is There a Case for Leaving Rates Where They Are?
The case for a hike is strong, but it is not unanimous. Mike Skordeles, head of U.S. economics at Truist Advisory Services, has said a September hike is not a sure thing and described the debate as close [5]. He warned that higher energy prices combined with higher rates could slow the economy more than a modest quarter-point move would suggest [2].
Core inflation, which excludes food and energy, offers one argument for patience. Core CPI rose 2.4% over the 12 months ending in August, down from 2.5% in July [2][3]. Jay Woods, chief market strategist at Freedom Capital Markets, said Warsh could point to that slowdown to justify holding steady [4]. Reports frame the monthly picture differently, however. The AP reported that core inflation picked up in August from the prior month [1], while CNN put the monthly core increase at 0.3% [2].
The job market is another question mark. Employers added 162,000 jobs in August, well above expectations, but hiring in June and July combined totaled just 52,000 [2]. May added 63,000 [3]. Noah argues the August figure may be a fluke and cites former Congressional Budget Office chief economist Wendy Edelberg, who said on CNBC that the number is likely to be revised down, possibly to about 20,000 or even zero [3].
Policymakers have also historically looked past supply shocks such as oil price spikes, since they cannot control them directly [5]. In July, Warsh suggested that higher Treasury yields may already be doing some of the Fed’s inflation-fighting work [5]. Noah also points to the Fed’s preferred inflation gauge, the personal consumption expenditures price index, which he says showed overall and core inflation mostly falling through July, at 3.7% and 3.3% respectively [3]. On that basis, Noah contends that leaving rates unchanged would be a reasonable call [3].
Can the Fed Stay Independent With Elections Seven Weeks Away?
The decision arrives seven weeks before the midterm elections, with high prices and affordability among the central issues [1]. President Donald Trump has called for lower rates, saying Sunday that the country is strong enough to pay the lowest interest rates in the world [1]. Economists, however, say a cut is not realistically on the table [5].
Kevin Hassett, director of the National Economic Council, said Sunday that the president fully respects Warsh’s independence and would support the Fed’s decision [4]. In a Fox News interview, Hassett suggested the Fed should avoid raising rates so close to an election [1]. He also said inflation is improving and acknowledged the president would not be especially pleased by an increase, according to Wall Street Journal reporting cited by Kiplinger [4].
Timing adds another layer. Payne argues the Fed is unlikely to begin hiking at its Oct. 27 and 28 meeting, just before Election Day, and that moving in September and December would be the safer route [4]. Noah, by contrast, contends an October hike remains possible if upcoming jobs and inflation data run hot [3].
There is risk on both sides. The Wall Street Journal’s Nick Timiraos, as cited by Kiplinger, wrote that holding steady when investors widely expect a hike could fuel suspicion that Warsh is accommodating the president who appointed him [4]. For households, what matters most is a central bank that makes decisions based on the data. A Fed seen as independent helps protect the purchasing power of the dollar, regardless of who holds office.
How Could a Rate Hike Affect Borrowing and Savings?
For most households, the first effects of a hike would show up on variable-rate debt. Rodney Williams, co-founder and president of SoLo Funds, told USA Today that credit card interest rates could rise within one to two billing cycles, pushing minimum payments higher [5]. He said home equity lines of credit and variable-rate personal loans could also get more expensive as their rates reset, while adjustable-rate mortgage holders may be shielded only until their next scheduled adjustment [5].
Even a modest increase will ultimately make it harder to pay down existing debt.
Rodney Williams, SoLo Funds co-founder and president [5]
Anyone carrying a balance has good reason to revisit strategies for paying off high-interest debt before any increase takes hold.
Mortgages and auto loans work differently, since they track longer-term rates. The AP notes that a hike could actually help hold those rates down by strengthening confidence in the Fed’s commitment to fighting inflation, as some of the recent jump in mortgage rates likely reflected investor doubts [1]. Long-term yields have been climbing. The 10-year Treasury yield hit 5% on Monday [3][4] and reached an intraday high of 5.041% Tuesday, its highest level since 2007, while the 30-year yield sat above 5.3% [4].
Paul Christopher, head of global investment strategy at the Wells Fargo Investment Institute, attributes the rise in yields to war, tariffs, and competition for capital from AI spending rather than weak demand for U.S. debt [4]. He pointed to a Sept. 9 10-year Treasury auction that drew the strongest demand since 2019, while acknowledging growing pressure on Congress to rationalize its budget [4].
Savers stand to benefit. Higher rates typically mean better returns on high-yield savings accounts and certificates of deposit, though not every bank or credit union adjusts at the same pace [5]. CJ Pointkowski of Navy Federal Credit Union suggested savers review their accounts often and move when they find a competitive rate rather than trying to time the market [5]. Investors felt the uncertainty Tuesday, as the Dow fell 0.6% to 52,092, the S&P 500 lost 0.5%, and the Nasdaq dropped 0.8% [4]. A higher-rate environment tends to reward those who have built savings and kept borrowing in check.
What Should Everyone Watch After Wednesday?
The decision will come with the Fed’s updated Summary of Economic Projections and its dot plot, which shows where each policymaker expects rates to go [4]. In June, the dot plot pointed to a federal funds rate of 3.8% by the end of 2026, implying one quarter-point hike this year [4]. Deutsche Bank economists expect the new median projection to show another increase this year, with several officials projecting more [4].
Forecasts for the path beyond September vary. The AP reported that futures prices point to three hikes, in September, December, and March [1]. Kiplinger reported that futures traders are pricing in two increases by year’s end, while Brandon Zureick, chief economist at Johnson Investment Counsel, said the bond market expects one more hike later this year followed by one to two in 2027 [4]. USA Today reported that as of Sept. 13, a slight majority of traders expected a hold in October, and just under half were betting on a December increase [5].
How Warsh frames any hike could matter. Matthew Luzzetti, chief U.S. economist at Deutsche Bank, said it is rare for the Fed to raise rates only once [1]. If Warsh presents a hike as unwinding the three rate cuts made in late 2025, that would suggest two more increases, while framing it as risk management could point to just two in total [1].
Key dates ahead include the personal consumption expenditures report on Sept. 30 and the next jobs report on Oct. 2 [3]. The Fed meets again Oct. 27 and 28, then Dec. 8 and 9 [4]. Larger questions remain, including how effective rate hikes can be when much of today’s inflation stems from oil prices, and how the Fed would respond if an AI slowdown weighs on the economy [1].
Final Thoughts
Whether the Fed raises rates Wednesday or holds steady, the central household challenge remains the same. Prices are still rising at a 3.4% annual pace [2], and energy costs, tariffs, and the AI buildout continue to push costs higher across the economy [5]. The Fed has limited ability to influence oil prices directly [1].
For borrowers, the most practical step is reducing variable-rate balances, since credit card and home equity line costs would be the first to respond to a hike [5]. For savers, comparing yields rather than waiting for a bank to raise its rates could pay off [5]. For every household, building room in the budget for higher fuel and everyday costs is a sensible precaution, and finding ways to cut back on expenses now can create a cushion if prices keep climbing.
A stable dollar and a credible central bank serve everyone. Decisions in Washington will keep shaping borrowing costs, but the choices each household makes about debt, savings, and spending remain the most reliable protection against whatever comes next.
Works Cited
[1] Rugaber, Christopher. “Federal Reserve Is Expected to Raise Its Benchmark Rate, Defying Trump’s Demands.” AP News, Associated Press, 15 Sept. 2026, apnews.com/article/federal-reserve-kevin-warsh-interest-rates-ffd60cca8bb045bb9b1c389f5f1b73af.
[2] Buchwald, Elisabeth. “Inflation Heated Up Last Month, Boosting the Case for a Fed Rate Hike.” CNN, Cable News Network, 11 Sept. 2026, www.cnn.com/2026/09/11/economy/cpi-inflation-august.
[3] Noah, Timothy. “Don’t Knock Kevin Warsh if the Fed Doesn’t Raise Interest Rates.” The New Republic, 15 Sept. 2026, newrepublic.com/article/215407/kevin-warsh-fed-interest-rates.
[4] Venema, Karee, et al. “September Fed Meeting: Live Updates and Commentary.” Kiplinger, Future US, 15 Sept. 2026, www.kiplinger.com/investing/live/fed-meeting-updates-and-commentary-september-2026. Accessed 15 Sept. 2026.
[5] Barber, Rachel. “Is It Finally Time? Why the Fed May Raise Rates for First Time since 2023.” USA Today, 14 Sept. 2026, www.usatoday.com/story/money/economy/2026/09/14/federal-reserve-september-meeting-interest-rates/91655178007/.