The Federal Reserve raised its federal funds target range by 25 basis points to 3.75%–4.00% on Wednesday, delivering the first U.S. rate increase since 2023 in a unanimous 12-to-zero FOMC decision. The move itself was widely expected, but the updated September 2026 Summary of Economic Projections shifted attention to how quickly the central bank might tighten again.
Goldman Sachs now expects another 25-basis-point increase in October, reversing an earlier view that September would end the tightening cycle. The bank’s economists pointed to the Fed’s language about returning inflation to 2% more quickly as a signal that officials may prefer consecutive hikes rather than waiting until December. Sixteen of 18 policymakers now expect at least one more increase before the end of 2026, with the median federal funds rate projection at 4.1% for both 2026 and 2027.
Fed Chair Kevin Warsh reinforced the hawkish tone by saying the committee removed a dose of accommodation rather than moving policy firmly into restrictive territory. Goldman also highlighted an upward revision in policymakers’ neutral rate assessment, suggesting the destination for rates may be higher and that borrowing costs could stay elevated longer. The Fed raised its 2026 growth forecast to 2.3%, kept unemployment near 4.1%, and lifted its headline PCE inflation estimate to 3.7%.
Markets are not fully aligned with Goldman’s October call. Rate futures imply roughly a 50% probability of another hike in October and about a 90% chance of at least one more move by year-end. Bank of America expects hikes in both October and December, while BBVA Research puts the next increase in December. Goldman Sachs Asset Management’s Kay Haigh noted the October meeting falls close to U.S. midterm elections, which could make an immediate move politically sensitive.
Financial markets initially took the decision calmly but weakened during Warsh’s press conference. The S&P 500 ended down 0.45%, the Dow fell 1.21%, and the Nasdaq slipped 0.01%. The two-year Treasury yield rose seven basis points to 4.732%, while the 10-year yield finished near 5.012%. The dollar index gained 0.6% to 100.30 and later hit a seven-week high. Bitcoin and major crypto assets steadied after the announcement, although a higher path for cash rates raises the opportunity cost of holding non-yielding assets and can pressure leveraged positions.
