Fed Rate Hike Looms: Tech Stocks Face 35% Crash

The Federal Reserve's rate-setting body is meeting on September 15-16 to discuss a potential interest rate increase, which has an 87% chance of happening, according to the CME FedWatch tool. This would be the first hike since the tightening cycle that erased 35% from the Nasdaq Composite in 2022.

The reversal is stark for the technology industry, which spent much of early 2026 anticipating rate cuts. As recently as late 2025, the Federal Open Market Committee (FOMC) had been trimming the federal funds rate to bring it down from 4.00%, 4.25% to its current target range of 3.50%, 3.75%. However, new Fed Chair Kevin Warsh has signaled mounting unease about disinflation and is now projecting at least one rate hike before year-end.

The decisive pivot came August 28, when Warsh delivered his first address as Fed chair at the Jackson Hole Economic Policy Symposium in Wyoming. He emphasized that underlying inflation must move to the target speed, and acknowledged AI's potential as an economic force: 'We recognize that AI is a new variable, potentially a new factor of production, that will have consequences for both the economy and the conduct of monetary policy.'

The August consumer price data released September 11 further sealed the case for a hike. Core CPI rose 0.3% month-over-month, while headline CPI climbed 0.4%, holding the annual rate at 3.4%. The PCE price index had already shown elevated pressure as of its most recent release, with headline PCE up 3.7% year-over-year and core PCE running at 3.3%, both well above the 2% target.