Two weeks before the Federal Reserve's next interest rate decision, traders are recalculating the odds, and the shift has been sharp. The Fed's rate-setting committee, the Federal Open Market Committee, will announce its decision on Wednesday, September 16, at 2 p.m. Eastern time, followed by a press conference from Fed Chair Kevin Warsh.
The federal funds rate, the Fed's main tool for influencing borrowing costs across the economy, currently sits in a target range of 3.50 percent to 3.75 percent, unchanged since the Fed held steady at its July meeting. For months, many investors had expected the Fed to keep rates on hold through the rest of 2026. That began to change after Warsh's keynote speech at the central bank's annual gathering in Jackson Hole, Wyoming, in which he emphasized his commitment to keeping inflation under control.
The shift in expectations shows up clearly in prediction markets. On the trading platform Kalshi, traders now put the odds of a quarter-point rate hike in September at 48 percent, up sharply from odds of nearly 70 percent for no change before Warsh's speech. On the CME Group's FedWatch tool, which tracks fed funds futures, traders see a nearly 56 percent chance of a quarter-point increase, while on the platform Polymarket the odds stand at roughly 49 percent. Short-term Treasury yields have moved in tandem: the 2-year Treasury yield, which closely tracks expectations for near-term Fed moves, has climbed to its highest level since late July.
Behind the shift are two main forces, according to J.P. Morgan Wealth Management strategists: energy costs that have stayed elevated because of the ongoing conflict connected to Iran, and renewed investor doubts about the Fed's resolve to contain inflation after the central bank held rates steady in July. A recent U.S. employment report also came in stronger than many economists had expected, adding to the case that the economy may not need as much support from low interest rates as previously thought.
The Federal Open Market Committee meets September 15 and 16, with the rate decision and updated economic projections due at 2 p.m. Eastern on the 16th, followed by Warsh's press conference.
Who is Kevin Warsh?
Kevin Warsh is the current chair of the Federal Reserve, and his recent Jackson Hole speech emphasizing inflation control shifted market expectations toward a possible September rate hike.
When will the Fed announce its decision?
The Federal Open Market Committee's decision is due Wednesday, September 16, 2026, at 2 p.m. Eastern time.