Fed Raises Rates for the First Time Under Chair Kevin Warsh, Signals More Hikes Ahead
The Federal Reserve raised its benchmark interest rate this month to a target range of 3.75%–4.00%, marking the central bank’s first rate increase since 2023 and the first major policy decision under new Fed Chair Kevin Warsh. The quarter-point move had been widely expected heading into the meeting, but the bigger story for markets was what came with it: updated projections showing a majority of policymakers now anticipate at least one more hike before the end of the year.
How We Got Here
Warsh took over as Fed Chair earlier this year after being appointed by President Trump, arriving with market expectations that he would push the central bank toward the rate cuts Trump had been publicly demanding. Instead, Warsh’s early tenure has moved in the opposite direction. At the Fed’s Jackson Hole gathering in late August, Warsh delivered a notably hawkish speech, arguing that inflation had become broad-based rather than the product of a handful of one-time shocks, and that price growth was unlikely to drift back to the Fed’s 2% target on its own.
That speech reset market expectations almost immediately, with investors sharply increasing bets on a September hike in the days that followed. By the time the Fed’s policy meeting convened on September 15–16, a quarter-point increase was already largely priced in, shifting market attention to the accompanying projections and Warsh’s own comments instead.
What the Fed Actually Decided
The Federal Open Market Committee’s updated Summary of Economic Projections showed inflation running hotter than previously forecast, with 2026 price growth now expected around 3.6%, up from an earlier projection near 2.7%, before easing toward 2.3% in 2027. Nine of the committee’s policymakers penciled in at least one additional rate hike before year-end in their individual projections — notably, Warsh himself did not submit a dot in the projections, a detail market watchers flagged as consistent with his stated preference for de-emphasizing forward guidance.
The post-meeting statement itself was also notably different in tone and length from the Powell era. Language that had previously flagged the likelihood of further rate cuts was removed entirely, and the statement adopted a shorter, more streamlined format — a style some analysts compared to the approach used decades earlier under former Chair Alan Greenspan. The description of current conditions leaned on the idea that “productivity growth and capital investment are strong,” while attributing elevated inflation partly to supply-side pressures in specific sectors, including energy.
Markets responded quickly. Treasury yields rose following the release of the statement and projections, U.S. stocks dipped modestly in the immediate aftermath, and the dollar strengthened against a basket of major currencies — a fairly typical reaction pattern to a hawkish policy signal.
Why Warsh’s Approach Has Surprised Some Observers
Part of what’s made this stretch notable is the gap between expectations for Warsh coming into the role and how his early decisions have actually played out. Analysts had speculated he might face pressure to keep rates lower given the circumstances of his appointment. Instead, his Jackson Hole remarks and the September decision have been read by strategists as a deliberate signal that the Fed intends to act on the data in front of it rather than defer to any particular political preference. One fixed-income strategist described the message as effectively pre-committing the Fed to further tightening, while cautioning that incoming data could still complicate that path.
What This Means Going Forward
With the Fed’s own projections pointing to additional tightening before year-end, and Warsh having signaled a preference for responding to broad inflation trends rather than isolated data points, markets are treating a further move as a live possibility at the Fed’s remaining meetings this year. The August jobs report had eased some concerns about labor market weakness, while inflation readings for the same month showed price pressures still running well above the Fed’s target, even as core measures ticked down slightly year-over-year.
What It Means for Businesses
A Fed rate hike doesn’t affect every type of financing the same way. Variable-rate products — bank lines of credit, business credit cards, and loans priced off the prime rate — typically reprice higher within a billing cycle or two of a move like this one. Fixed-rate obligations, by contrast, are unaffected once locked in. We covered this distinction in detail, including what it means for financing decisions made in the current environment, in The Fed Just Raised Rates Again — Here’s What That Actually Means for Your Business’s Cost of Capital.
How Smart Business Funding Approaches a Rising-Rate Environment
Smart Business Funding’s Direct Fund Program uses a fixed factor rate that produces a disclosed total repayment amount at signing — a structure that isn’t indexed to the federal funds rate and doesn’t change if the Fed hikes again later this year. See the full process on the how it works page, explore lines of credit for ongoing capital needs, or apply now to see what a fixed-rate option looks like for your business.
Frequently Asked Questions
What did the Fed actually decide at its September 2026 meeting? The Fed raised its benchmark rate to a range of 3.75%–4.00%, the first increase since 2023 and the first policy decision under new Chair Kevin Warsh.
Is the Fed expected to raise rates again this year? The Fed’s own projections showed a majority of policymakers anticipating at least one more hike before year-end, though this depends on incoming economic data.
How is Kevin Warsh’s approach different from Jerome Powell’s? Warsh has shown a preference for shorter policy statements with less forward guidance, arguing markets can become overly dependent on Fed signaling about future moves.
Does this rate hike affect fixed-rate business financing? No — a Fed rate hike affects new originations and existing variable-rate balances; fixed-rate obligations already in place are unaffected.
Why did markets expect a hike even before the meeting? Warsh’s hawkish remarks at the Fed’s Jackson Hole gathering in late August shifted market expectations sharply toward a September move, which was largely priced in by the time the meeting occurred.
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