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"Inflation Is a Choice." The Fed Just Chose, 12 to 0.
The Fed raised rates to 3.75% to 4.00%, its first hike since 2023, in a unanimous vote. The plain-English read: who voted, what the dot plot says about 2026 to 2028, why the Fed hiked with core CPI at a five-year low, President Trump's 1% call, how oil shapes near-term inflation, and the dated markers ahead.
The Fed raised rates for the first time since 2023, every voter said yes, and most officials want one more. The President wants 1%. Oil is above $100. The whole picture in plain English, and what to watch next.
HeyTheo Research · Thursday, September 17, 2026
Quick Read
The move: On Wednesday, Sep 16, the Fed raised its key rate 0.25 points to 3.75% to 4.00%, its first hike since July 2023. (Federal Reserve)
The vote: 12 to 0. In July, only three officials wanted a hike.
The outlook: 16 of 18 officials expect at least one more hike this year. The median shows no cut until 2028.
The pushback: Hours later, President Trump said rates "should be 1% or less." (CNBC)
The driver: Oil. Brent settled at $105.83 Wednesday, and gasoline is up 27.4% in a year.
In July, the Fed voted 9 to 3 to wait. On Wednesday, the waiting ended.
The Fed raised its benchmark rate, the rate banks charge each other overnight, by a quarter point. That rate drives what you earn on savings and pay on a credit card.
The statement was four short paragraphs. The key line: "Inflation remains elevated. Today's policy action will support a timelier return to the Committee's 2 percent goal."
Chair Kevin Warsh was blunter: "The plain fact is that inflation is too high and has been for too long." (NBC News)
Readers of our Sep 11 note on the oil-to-yields chain saw this coming. Oil pushed prices up, prices pushed yields up, and now the Fed has moved.
Tool | New level (from Sep 17) | Change | In plain English |
|---|---|---|---|
Fed funds target range | 3.75% to 4.00% | +0.25 | The Fed's main interest rate |
Interest on bank reserves | 3.90% | +0.25 | What the Fed pays banks on cash parked with it |
Primary credit rate | 4.00% | +0.25 | What banks pay to borrow directly from the Fed |
Overnight reverse repo | 3.75% | +0.25 | The floor rate money-market funds earn at the Fed |
Balance sheet | T-bill buying "when appropriate" | None | Still adding short-term bills to keep bank cash "ample" |
Source: Federal Reserve statement and implementation note, Sep 16, 2026. Accessed Sep 17, 2026.
Who voted, and why 12 to 0 matters
The FOMC, the committee that sets rates, has 12 voters this year:
Board (7): Kevin Warsh (Chair), Philip Jefferson, Michelle Bowman, Michael Barr, Lisa Cook, Jerome Powell, Christopher Waller.
Regional presidents (5): John Williams (New York), Beth Hammack (Cleveland), Neel Kashkari (Minneapolis), Lorie Logan (Dallas), Anna Paulson (Philadelphia).
Three details matter:
The July dissenters won. Hammack, Kashkari and Logan lost 9 to 3 in July. This time nobody dissented.
Powell is still in the room. The former chair stayed on as a governor after Warsh took over in May. A 12 to 0 vote means he backed the hike.
Warsh has no dot. "Those aren't my forecasts," he said of the projections. "Those are the forecasts of my 18 colleagues." (Fortune)
A split vote invites traders to bet on a reversal. A unanimous one tells them the committee won't flinch.
What the dots say about the future
Each official marks where rates should be at each year's end. Those marks are the "dot plot." (Fed projections)
End of 2026: 12 see one more hike, 4 see two, 2 see none.
End of 2027: the median holds at about 4.1%. In June it was 3.6%, so the path jumped half a point in three months. Eight officials see rates even higher.
First cut: not until 2028 on the median.
Neutral rate: the level that neither speeds up nor slows the economy rose to 3.2% from 3.1%, which fits the stronger-economy view in our Williams note.
Forecasts moved the same way: 2026 growth up to 2.3%, unemployment down to 4.1%, inflation up to 3.7%. 17 of 18 officials say inflation risks lean higher. Markets price one more hike, in December. (Advisor Perspectives, citing CME FedWatch)
Why hike when core CPI is at a five-year low?
This is the question most coverage skipped.
August CPI rose 3.4% from a year earlier. Core CPI, which leaves out food and energy, rose 2.4%, its lowest since March 2021. (BLS)
But the Fed steers by a different gauge, PCE. And PCE runs hotter: 3.7% overall and 3.3% core in July. (BEA, via CNBC)
Why they disagree:
Rent. CPI gives housing a bigger weight, and rent inflation is cooling.
Wall Street and AI. PCE counts costs CPI barely tracks, like investment management fees, which climb with stock prices. Financial services and insurance prices jumped 1.2% in July alone. (CNBC) Natixis economists also flag computer hardware and software prices tied to the AI data-center boom. (Morningstar)
That is the missed link: the stock rally and the AI build-out we tracked in our Nvidia note now show up in the Fed's own inflation gauge.
Then there is the real rate, the Fed's rate minus inflation. At a 3.875% midpoint and 3.3% core PCE, it is only about 0.6 points. Hence Warsh: "I would be hard pressed to describe broad financial conditions as restrictive."
How inflation may behave near term
The facts on record, not a forecast:
Oil swings the path. Brent rose more than 16% in September as Gulf fighting escalated, then fell 2.7% Wednesday on word that a damaged Saudi pipeline would restart within days. Analysts warn repairs could take weeks. (CNBC)
Gas is already in the data. It rose 27.4% over the year and drove over a third of August's CPI gain. (BLS)
The Fed expects PCE to end 2026 at 3.7% (core 3.4%), then fall to 2.3% in 2027.
The EIA expects Brent near $90 for the rest of 2026 and $77 by spring 2027. (EIA)
So: September CPI on Oct 14 will be the first to capture this month's oil spike. The relief the Fed pencils in for 2027 depends on oil falling, and Warsh said plainly that the Fed cannot reopen the Strait of Hormuz. It can only stop energy costs spreading into everything else.
Trump's view, and the arithmetic
After the decision, President Trump posted: "LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!" He said the rate "should be 1% or less." (NBC News; CNBC)
He said he still has confidence in Warsh. (CNBC)
The week before, the President, Vice President, Treasury Secretary and a senior economic counselor all urged the Fed not to hike. (CNBC)
The case for lower rates, as supporters make it: cheaper borrowing for families, businesses and a government whose interest bill grows with rates.
The arithmetic the Fed weighs: with inflation at 3.3% to 3.7%, a 1% rate means a real rate near minus 2.5 points. Today's is near plus 0.5.
Warsh framed the hike as help for workers without stocks or home equity, so they can see "real take-home pay increases." (Yahoo Finance)
One more friction: the Treasury is buying back long bonds to calm long yields, while Warsh wants a smaller Fed balance sheet. Gavekal says that puts the two at odds. (CNBC) We flagged those buybacks in our bond selloff note.
The next Fed decision lands Oct 28. Midterms follow on Nov 3.
What it touches
Savings and money funds: yields tend to follow the Fed up.
Credit cards and home-equity lines: most track the prime rate, usually 3 points above the Fed's top rate, so expect about a quarter-point rise.
Mortgages: these follow the 10-year Treasury, which sat near 5.0% Wednesday after touching its highest since 2007.
Stocks: higher before 2 p.m., lower during the press conference. The Dow closed down 718 points, the S&P 500 down 0.64%.
Banks: BAC and WFC fell about 3%, JPM 1.9%, on worries that higher short-term rates squeeze lending margins.
The dollar: up 0.6%, strongest since late July.
Three roads from here
One more, then a long pause. The dots' base case: oil eases, one more hike Dec 9, hold through 2027. Marker: cooler energy in September CPI (Oct 14).
More work. Oil stays above $100 and spreads. Marker: core PCE at 3.3% or higher on Sep 30, and the 10-year above 5%.
Growth blinks first. Payrolls fell in July before a strong August. (Yahoo Finance; CNBC) Marker: the next two jobs reports.
Warsh says he is "not in the forward guidance business." With no road signs from the chair, every data day matters more.
The rules HeyTheo tracks
Basket: group covered banks (BAC, WFC, JPM) and watch them as one unit on rate days.
Trigger: flag unusual moves on Sep 30 (PCE), Oct 7 (Fed minutes), Oct 14 (CPI) and Oct 28 (Fed decision).
Money flow: watch whether big money leaves banks and long-duration growth stocks while the 10-year holds near 5%.
Ask Theo: bull case, bear case and what to watch for any covered bank before October earnings.
Check the rule behind any trigger before acting on it. You trade through your own broker; HeyTheo helps you decide.
The Margin Note
12 to 0. July's split is gone.
One more hike is the base case. No cut on the median until 2028.
Core CPI looks calm. The Fed steers by PCE, and PCE is hot.
Oil sets the near-term path, and the Fed cannot control oil.
FAQs
What did the Fed do on September 16, 2026?
It raised the federal funds target range 0.25 points to 3.75% to 4.00%, its first increase since July 2023, effective Sep 17.
Did anyone vote against the rate hike?
No. The vote was 12 to 0. In July, Hammack, Kashkari and Logan had dissented in favor of a hike.
Will the Fed raise rates again in 2026?
Most officials expect to: 16 of 18 project at least one more hike, and markets price one in December. Warsh made no commitment.
What did President Trump say about the hike?
He called for the Fed to lower rates "fast," said the rate "should be 1% or less," and said he still has confidence in Warsh.
How does the hike affect mortgages and credit cards?
Card and home-equity rates usually follow the prime rate, so they tend to rise about a quarter point. Mortgages track the 10-year Treasury, which sits near 5%.
Sources
Federal Reserve, FOMC statement and implementation note, Sep 16, 2026. Accessed Sep 17, 2026.
Federal Reserve, Summary of Economic Projections, Sep 16, 2026. Accessed Sep 17, 2026.
Federal Reserve Board, Board Members page. Accessed Sep 17, 2026.
CNBC, "Fed rate decision September 2026: Rates rise to 3.75%-4%," Sep 16, 2026. Accessed Sep 17, 2026.
CNBC, "Trump says he still has confidence in Fed Chair Warsh, demands 1% or lower interest rates," Sep 16, 2026. Accessed Sep 17, 2026.
CNBC, "Trump turns up the heat on Warsh as Fed rate hike looms," Sep 5, 2026. Accessed Sep 17, 2026.
CNBC, Jackson Hole analyst roundup, Aug 31, 2026. Accessed Sep 17, 2026.
CNBC, "Fed's preferred inflation gauge shows core prices rose 3.3% annually in July," Aug 26, 2026. Accessed Sep 17, 2026.
CNBC, "Oil prices fall after U.S. says damaged Saudi pipeline will restart operations in days," Sep 16, 2026. Accessed Sep 17, 2026.
NBC News, "Fed raises interest rates for first time since 2023, defying Trump as inflation mounts," Sep 16, 2026. Accessed Sep 17, 2026.
Bloomberg, "Fed Raises Rates as Warsh Bucks Trump," Sep 16, 2026 (headline and summary). Accessed Sep 17, 2026.
Fortune, "Stocks slide toward lowest level since July after Warsh's hawkish press conference," Sep 16, 2026. Accessed Sep 17, 2026.
Benzinga, "Stocks Sink, 10-Year Yield At 5% As Warsh Delivers Hawkish Show," Sep 16, 2026. Accessed Sep 17, 2026.
Invezz, "Dow crashes 700 points as Warsh warns inflation is still too high," Sep 16, 2026. Accessed Sep 17, 2026.
Yahoo Finance, Fed meeting live updates, Sep 16, 2026. Accessed Sep 17, 2026.
Yahoo Finance, "Fed July 2026 FOMC minutes: rate hike debate details," Aug 2026. Accessed Sep 17, 2026.
Kiplinger, "September Fed Meeting: Updates and Commentary," Sep 16, 2026. Accessed Sep 17, 2026.
Advisor Perspectives, "Fed's Interest Rate Decision: September 16, 2026." Accessed Sep 17, 2026.
Brookings, "Who has to leave the Federal Reserve next?," Sep 2026. Accessed Sep 17, 2026.
US Bureau of Labor Statistics, Consumer Price Index, August 2026, Sep 11, 2026. Accessed Sep 17, 2026.
US Inflation Calculator, "US CPI August 2026," Sep 11, 2026. Accessed Sep 17, 2026.
Trading Economics, United States Inflation Rate. Accessed Sep 17, 2026.
US Bureau of Economic Analysis, Personal Income and Outlays, July 2026, Aug 26, 2026. Accessed Sep 17, 2026.
Morningstar, "PCE Inflation Likely to Edge Higher in July," Aug 2026. Accessed Sep 17, 2026.
US Energy Information Administration, Short-Term Energy Outlook, Sep 9, 2026. Accessed Sep 17, 2026.
Chicago Fed, Federal Reserve calendars (FOMC 2026 dates). Accessed Sep 17, 2026.
Disclaimer: HeyTheo is a research and education platform, not an investment adviser, broker-dealer, or registered representative. Nothing here is advice to buy, sell, or hold any security. HeyTheo does not execute trades or manage money: you trade through your own broker; HeyTheo helps you decide. Any baskets, triggers, or rules described are illustrative. Backtested results are hypothetical: a rule that looks sharp on past prices was fitted to a market that already happened, and the next rate cycle will not replay the last one. Statements by the President, administration officials and Fed officials are reported for market context and are not a political endorsement of any party, official or position. All investing involves risk, including possible loss of principal. Consider your own objectives and consult a licensed financial professional before making any investment decision. Data is as of the dates noted and may change.