The Federal Reserve's policy setting committee gathered today for the first of two days of meetings, with an announcement due Wednesday at 2 p.m. Eastern time, followed by a press conference from Chair Kevin Warsh half an hour later.
The federal funds rate, the benchmark that ripples out into mortgages, credit cards, and business loans, has sat in a range of 3.50 to 3.75 percent since December. The committee held it there again at its last meeting in July, with policymakers unanimously agreeing at the time to keep the rate paid on bank reserves at 3.65 percent. Minutes from that July meeting showed investors already saw a real chance of a hike by September, even as most expected no change that summer.
Since then, the case for a hike has grown louder in some corners of Wall Street. Chair Warsh used his keynote address at the Jackson Hole economic symposium in late August to strike a notably firm tone, pointing to inflation that has run near 3.7 percent over the past year and describing progress on prices over the last two years as modest. A solid August jobs report added to bets that the Fed may move rather than wait. If it does raise rates, it would be the first increase since 2023, a reversal after a period in which the central bank had been expected to keep cutting.
The picture is not entirely settled. Inflation by the consumer price index measure has actually eased for two straight months, down to 3.4 percent in July, which gives the committee room to argue for patience and simply signal a possible later move through its updated quarterly economic projections, sometimes called the dot plot. Those projections, along with fresh forecasts for growth and unemployment, will be released alongside Wednesday's rate decision.
Stocks were already choppy heading into the meeting. The S&P 500 slipped 0.37 percent on Monday to close at 7,629, its third straight weekly pullback, though the index remains more than 15 percent higher than a year ago. The Dow Jones Industrial Average fell 152 points, dragged lower by Caterpillar, Goldman Sachs, and Nvidia, while Salesforce, IBM, and Alphabet posted gains. Much of Monday's weakness in chip stocks tracked back to a separate story out of Silicon Valley about the pace of artificial intelligence development, detailed below.
The rate decision and updated projections land Wednesday at 2 p.m. Eastern, with Chair Warsh's press conference to follow. Markets will be watching not just the headline move but how many more increases, or holds, the dot plot suggests for the rest of the year.
Why would the Fed raise rates instead of cutting them?
Inflation has run above the Fed's comfort level over the past year and Chair Warsh signaled at Jackson Hole that progress on prices has been modest, which has shifted market expectations toward a hike.
When will we know the decision?
The Fed announces its decision at 2 p.m. Eastern on Wednesday, September 16, with a press conference thirty minutes later.