Fed Decision on September 16: Rate Hike and Inflation Impact

The Federal Reserve's decision on short-term interest rates will have significant implications for the economy and stock market. On September 16, the Fed will announce its latest decision, which is currently estimated to be a 60% chance of a rate hike, according to CME Group's FedWatch tool. This increase would likely be bearish for the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average.

However, the bigger impact could come from what new Fed Chair Kevin Warsh says about fighting inflation in light of the Fed's action or inaction. The Consumer Price Index (CPI) has been running hot, with a 3.4% increase in the 12 months ending July 2026, although this is a deceleration from prior readings.

The preferred gauge for judging inflation, the personal consumption expenditures (PCE) price index, shows a 3.7% increase over the past year, with 54% of its basket of goods seeing prices rise by more than 3%. This suggests that inflation is running higher than desired and likely supports a rate hike on September 16.