The Federal Reserve's September 16, 2026, decision to raise the federal funds rate 25 basis points to a 3.75%-4.00% target range, its first hike since 2023, has sharply reduced near-term expectations for cuts. Updated Summary of Economic Projections showed 16 of 18 participants anticipating at least one additional quarter-point move by year-end, lifting the median endpoint to 4.1%. August CPI data, released September 11, showed a 0.4% monthly gain and 3.4% year-over-year increase, with energy prices contributing significantly and core inflation holding at 2.4%. Stronger 2026 growth and lower unemployment forecasts reinforced the hawkish shift. Markets now price roughly 90% odds of another hike before December, with the next FOMC meetings on October 27-28 and December 8-9 serving as key catalysts for any reassessment of the rate path.

Sep 17 2026

Strong economic data and Fed hike reduce odds of January 2027 rate cut

January 2027 Meeting plunges to 11%39%

The combination of the Fed's September hike and robust economic indicators led to a steep decline in market pricing for a rate cut at the January 2027 meeting, with contract prices falling from 50% to 11%. This reflects a market consensus that cuts in early 2027 are unlikely.

Sep 17 2026

Markets react to Fed rate hike with sharp decline in rate cut probabilities

December 2026 Meeting dips to 3%4%

Following the September 16 rate hike, market prices for rate cuts at the December 2026 and subsequent meetings dropped sharply, reflecting diminished expectations for easing in the near term. This was evident in the December 2026 meeting contract price falling from 7% to 3% and similar declines in other meetings.

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