Key Takeaways
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The September 2026 FOMC meeting will take place on 15-16 September, with the rate decision and policy statement due on 16 September. Markets are currently weighing a hold at 3.50%-3.75% against a 25-basis-point hike. Softer July employment and retail-sales data have supported expectations for a hold, while inflation remains above the Federal Reserve’s 2% goal and keeps the hike scenario in play.
September Fed Rate Outlook: Will the Fed Hold or Hike
Before Warsh’s speech at the Jackson Hole Symposium, July softer employment and retail sales data had strengthened the case for the Fed to leave rates unchanged. However, inflation remains above the Fed’s 2% goal, and Warsh’s comments indicate that policymakers may need clearer evidence of sustained disinflation before easing policy.
The outlook is therefore finely balanced. A September hold remains possible, but the odds of a 25-basis-point hike has increased following the Chair’s comments. The next major data releases may determine whether market expectations move further towards a hike or return to a hold.
Scenario One: The Fed Holds Rates Steady
The Fed may maintain the federal funds target range if the August employment report shows further labour-market weakness and inflation continues to moderate. A hold would not necessarily be interpreted as dovish. If the statement or press conference stresses persistent inflation, markets could still maintain expectations for higher rates later in the year.
Scenario Two: The Fed Raises Rates by 25 Basis Points
The Fed may raise the target range if inflation remains persistent or the August data indicate that price pressures are not easing quickly enough. A hike would reinforce the Fed’s commitment to its 2% inflation goal and could support the US dollar and short-term Treasury yields. Rate-sensitive assets, including gold and growth stocks, could come under pressure if the decision is more hawkish than markets expect.
What Changed Since the July FOMC Meeting
The July FOMC meeting left interest rates unchanged at 3.50%-3.75%, while the 9-3 vote showed that three policymakers still favoured a 25-basis-point hike. Fed Chair Kevin Warsh described the disagreement as a “good family fight”, with the meeting reinforcing the Fed’s more data-dependent approach. Since then, incoming economic data have shifted the outlook for September, with employment, inflation and consumer activity offering fresh clues about the Fed’s next move.
- Labour Market: July nonfarm payroll employment fell by 23,000, while the unemployment rate was 4.1%. Payroll gains for May and June were also revised down by a combined 103,000, pointing to a softer labour market than previously reported.
- Inflation: July CPI rose 3.4% year-on-year, while core CPI increased 2.5%. The moderation provides some relief on inflation, although price growth remains above the Fed’s 2% target.
- Consumer Activity: July retail sales fell 0.6% month-on-month, marking the first decline in nine months and adding to signs of softer consumer demand.
Overall, the latest data have strengthened the case for a September rate hold but not eliminated the possibility of a hike. The Fed still needs to balance a cooling labour market and softer demand against inflation that remains above target.
What to Watch Ahead of the September 2026 FOMC Meeting
With greater emphasis on incoming data, several economic indicators will be important in shaping expectations for the September meeting. Traders will be watching whether inflation continues to ease, whether labour-market conditions remain resilient and whether energy or other supply pressures create renewed inflation risks.
| Key Driver | Why It Matters | What Traders Should Watch |
|---|---|---|
| Inflation | Inflation remains above the Fed’s 2% goal, while supply shocks and continued investment add complexity to the outlook. | CPI, PCE, underlying services inflation, retail energy costs |
| Energy Risks | Energy-related supply shocks can keep inflation elevated and influence expectations for monetary policy. | WTI crude oil prices, short-term inflation expectations |
| Economic Data | With less forward guidance, incoming data has a greater influence on expectations for the Fed’s next move. | Non-Farm Payrolls (NFP), unemployment, wages, Jobless Claims, JOLTS |
| Treasury Yields | The 2-year yield is closely linked to Fed rate expectations, while the 10-year reflects broader inflation, growth, and policy expectations. | 2-year yield, 10-year yield, USD, Gold, Stocks |
| Summary of Economic Projections (SEP) and Dot Plot | The September meeting will include updated projections for inflation, economic growth, unemployment and the federal funds rate, giving markets more clues about the policy path through the end of 2026. | Year-end rate projections, GDP, inflation and unemployment forecasts |
| Balance Sheet & Quantitative Tightening (QT) | Fed commentary on quantitative tightening and liquidity conditions could provide additional insight into financial conditions beyond the interest-rate decision. | QT guidance, Treasury-market liquidity and financial conditions |
How Could the September FOMC Decision Affect Markets
The September FOMC decision could affect markets through both the rate decision and the tone of the Fed’s communication. As Chairman Warsh has signalled limited reliance on forward guidance, markets may react more sharply to his comments, the statement’s inflation language and the updated policy projections. This could increase uncertainty if investors interpret the communication as more hawkish or dovish than expected.
Forex
Changes in Fed expectations can directly impact the US dollar and major currency pairs. Stronger-than-expected economic data could raise expectations of tighter US monetary policy and support the dollar, while weaker data could reinforce expectations of a less restrictive Fed.
The dollar’s direction will also depend on other central banks. If the Fed remains hawkish while another central bank becomes more accommodative, policy divergence could strengthen the dollar. For pairs such as GBP/USD, traders should therefore watch both US data and Bank of England expectations.
Stock Markets
An unchanged Fed rate does not necessarily mean stable equity markets. Stocks can still react to changes in the expected rate path, with higher-for-longer expectations potentially raising borrowing costs and pressuring growth and technology valuations. The July meeting provided an example, with the S&P 500 and the Nasdaq 100 coming under immediate pressure following the decision.
Commodities
- Gold (XAU/USD) is particularly sensitive to Fed expectations because it does not pay interest. Higher Treasury yields can increase the opportunity cost of holding gold, while inflation and geopolitical risks can support safe-haven demand.
- Crude oil (USOIL) has a different relationship with monetary policy. Rising oil prices can increase inflation expectations and make the Fed more cautious about easing, while higher energy costs can also weigh on economic growth.
Both markets can provide clues about changing inflation and interest rate expectations.
Gold’s Reaction to the July FOMC Decision
Gold provided a clear example of how Fed expectations can influence commodity markets. Ahead of the 29 July FOMC decision, XAU/USD was under pressure, falling from above $4,100/oz towards the $4,000/oz area as markets weighed a stronger US dollar and uncertainty over the Fed’s stance on inflation.
After the Fed kept rates unchanged at 3.50%-3.75%, gold stabilised around $4,000/oz and rebounded sharply, briefly moving back above $4,100/oz. The move showed how gold can recover when concerns about further rate increases ease.
XAU/USD price movement before and after the 29 July 2026 FOMC decision, as shown on TradingView.
What to Expect from the September FOMC Meeting with CME FedWatch
The CME FedWatch Tool provides a snapshot of how markets currently view the next Fed decision. Fed Chair Warsh’s comments increased market expectations for a possible rate hike, with the implied probability rising above 50% from around 36% before the speech, according to the cited federal funds futures snapshot.
Source: CME FedWatch Tool data as of 31 August 2026
These probabilities reflect market-implied expectations rather than the Fed’s own forecast and can change as August inflation, employment and other economic data are released.
How ATFX Supports Traders as Fed Expectations Shift
As markets enter a more data-dependent period ahead of the September FOMC meeting, traders can monitor currencies, indices and commodities as rate expectations evolve. Economic releases, Treasury yields and Fed communication can provide further clues about the policy outlook.
Markets to Monitor with ATFX
The following ATFX instruments give traders access to key markets to monitor as Fed expectations evolve.
| Market | ATFX Instruments | How FOMC Decisions Can Affect Them |
|---|---|---|
| Forex | EUR/USD, GBP/USD | A hawkish Fed can support the USD, while a less hawkish outlook can weaken it. |
| Indices | Nasdaq 100 (NAS100), S&P 500 (SPX500) | Higher rate expectations can pressure equity valuations, particularly growth stocks. |
| Precious Metals | Gold (XAU/USD) | Higher rates and yields can weigh on gold, while lower yields can support it |
| Energy | US WTI Crude Oil (USOIL) | Fed policy can influence oil through growth, inflation and USD expectations. |
ATFX provides access to real-time market news and analysis across major asset classes, alongside AT DeepSight, an AI-powered market intelligence tool for analysing market patterns, news sentiment and macroeconomic events. Traders can also use Trading Central to support technical analysis, an economic calendar to track major market events. Traders can also explore Trader Magazine for broader coverage of macroeconomic developments, energy markets, global trends and other factors that can influence market sentiment.
