The Federal Reserve Eccles Building in Washington, where the Fed interest rate is set

Fed Interest Rate Outlook: Hot September CPI Lifts Odds of an October Hike

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Key numbers (as of Oct. 14, 2026)

  • Fed funds target range: 3.75% to 4.00%, set Sept. 16, 2026, effective Sept. 17.
  • Last decision: a 0.25-point hike, approved 12–0 at the Sept. 15–16 FOMC meeting.
  • Next meeting: Oct. 27–28, 2026, then Dec. 8–9.
  • Dot plot (Sept. 16): median 4.1% at the end of 2026 and 4.1% at the end of 2027.
  • Market odds (CME FedWatch, Oct. 14): October hike odds rose from 22.1% on Oct. 13 to between roughly 35% and 54% during Wednesday’s session, as reported by CNBC and The Wall Street Journal.
  • CPI (September, released Oct. 14): 3.7% a year, 0.6% on the month; core 2.6%.
  • PCE (August, released Sept. 30): 3.4% a year; core PCE 3.0%.

The Federal Reserve interest rate outlook shifted on Wednesday, Oct. 14, 2026, when the Bureau of Labor Statistics reported that consumer prices rose 3.7% in the year to September. The report arrived two weeks before the Fed’s Oct. 27–28 meeting in Washington, and futures traders sharply raised the odds that Chair Kevin Warsh’s Fed will lift rates again this month.

Photo: The Marriner S. Eccles Federal Reserve Board Building in Washington. AgnosticPreachersKid / Wikimedia Commons, CC BY-SA 3.0.

Where the Fed funds rate stands after the September hike

At its Sept. 15–16 meeting, the Federal Open Market Committee (FOMC) raised the target range for the federal funds rate by a quarter point to 3.75% to 4.00%. The vote was 12–0, according to the Fed’s policy statement. It was the Fed’s first rate increase since 2023.

The statement said economic activity “is expanding at a solid pace,” that domestic spending “has been resilient” and that “Inflation remains elevated.” It closed with a short line that markets have quoted ever since: “The Committee will deliver price stability.” The minutes of the meeting, released Oct. 7, said all participants supported the increase.

What Chair Warsh has said

At his Sept. 16 news conference, Warsh described an economy he saw as gaining strength. According to the official transcript, he said: “Our decision comes at a time when the American economy appears to be strengthening.”

He also repeated a point he made at the Jackson Hole symposium: “I would be hard pressed to describe broad financial conditions as restrictive.” Explaining the hike, he said: “So we removed a dose of accommodation.”

Warsh is scheduled to appear in a fireside chat with International Monetary Fund Managing Director Kristalina Georgieva in Bangkok late Thursday, New York time, according to a Babypips market calendar. It will be his first public appearance since the September inflation report.

The dot plot: one more hike penciled in

The Fed’s Summary of Economic Projections, released Sept. 16, put the median year-end 2026 projection for the fed funds rate at 4.1%. That implies one more quarter-point increase this year, to a 4.00% to 4.25% range. The median for the end of 2027 was also 4.1%, signaling no further change that year. Officials projected 3.9% for 2028, 3.6% for 2029 and a longer-run rate of 3.2%.

The dot plot is a summary of individual officials’ views, not a commitment. It was drawn up before the September CPI report.

Inflation: September CPI and August PCE

The consumer price index rose a seasonally adjusted 0.6% in September and 3.7% from a year earlier, the BLS reported at 8:30 a.m. ET on Oct. 14. Economists surveyed by Dow Jones had expected 0.6% and 3.6%, CNBC reported. The annual rate was up from 3.4% in August.

Core CPI, which leaves out food and energy, rose 0.3% on the month and 2.6% on the year, against forecasts of 0.2% and 2.5%. Gasoline prices rose 9.1% in September alone and accounted for more than half of the monthly increase, according to the BLS figures cited by CNBC. Gas prices are up 34% from a year earlier. Analysts have tied the rise in fuel costs to the Iran war and disruption in the Strait of Hormuz, covered in our report on the GFS Pride sinking in the Strait of Hormuz.

The Fed’s preferred gauge, the personal consumption expenditures (PCE) price index, rose 0.3% in August and 3.4% from a year earlier, the Bureau of Economic Analysis reported on Sept. 30 in its Personal Income and Outlays release. Core PCE rose 0.2% on the month and 3.0% on the year. That was lighter than expected, CNBC reported at the time.

The producer price index for September is due Thursday, Oct. 15, according to the BLS release schedule.

Market odds for October and December

Readings of the CME FedWatch tool moved quickly on Wednesday. On Tuesday, futures implied a 22.1% chance of a quarter-point hike on Oct. 28. After the CPI release, CNBC reported readings of about 35% and, later, 53.7%. The Wall Street Journal cited 49%, calling the outcome “roughly a toss up.” By the end of the day, Babypips put market pricing near 37%.

The odds for December were firmer. CNBC reported a better-than-90% chance of at least one more hike by year-end, including about a 40% chance that rates end the year a half point higher. That was double the odds a day earlier.

Some analysts say the timing of the Oct. 28 meeting, a week before the Nov. 3 midterm elections, may make an October move less likely. Realtor.com reported that most analysts had expected the Fed to hold in October and hike in December.

How the jobs data fits in

The Fed’s other mandate, maximum employment, gives a more mixed picture. The September jobs report, released Oct. 2, showed employers added 29,000 jobs and the unemployment rate rose to 4.2%. After that report, FedWatch showed about 82.8% odds of a hold in October, CNBC reported. The CPI report reversed much of that shift. For more on jobs, tariffs and the budget, see our Economics hub.

What analysts are saying

John Kerschner, a portfolio manager at Janus Henderson, told CNBC by email that the market reaction “reminds me of the oft-quoted adage from Mike Tyson – ‘Everybody has a plan until they get punched in the face.'” He added that he wondered whether “the Fed, and especially Chair Warsh, is feeling the same this morning.”

Christopher Rupkey, chief economist at Fwdbonds, told CNBC: “Inflation is alive and the only way the Warsh Fed knows how to kill it is with another dose of higher rates.”

Jeff Schulze, head investment strategist at Franklin Templeton Institute, said the release “should be a modest headwind to risk assets” as rising expectations for near-term hikes put pressure on long-term bond yields.

For the day’s market moves, see our stock market report for Oct. 14.

Sources