The Fed Hiked to 3.75%-4.00% With a Dot at 4.1%. Since Then: 29,000 Jobs, a 77.9% Prices Index, and Two Governors Who Frame the Next Step Differently

by Nora Halloran · October 2, 2026

Senior Analyst, US Market Current

On Sept. 16 the Federal Open Market Committee "decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent," by a 12-0 vote, in a statement of nine sentences that ended: "The Committee will deliver price stability." Sixteen days later, the data and speeches that have followed do not point one way, and two members of the Board have described the next step in noticeably different terms.

Start with what the committee wrote down. The Summary of Economic Projections released with the decision put the median participant's appropriate federal funds rate at the end of 2026 at 4.1%, up from 3.8% in June, with a central tendency of 4.1%-4.4% and a full range of 3.9%-4.4%. The current range has a midpoint of 3.875%, so on our arithmetic a 4.1% median is consistent with one further quarter-point move this year, the 3.9% floor with none, and the 4.4% top with two. The 2027 median is also 4.1%, up from 3.6%. The table raised the 2026 median for PCE inflation to 3.7% from 3.6% and for core PCE to 3.4% from 3.3%, and cut the year-end unemployment median to 4.1% from 4.3%.

The statement gave the reasoning in compressed form: "Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little. Inflation remains elevated."

The most consequential data point since then bears on that sentence about job gains. The Bureau of Labor Statistics reported this morning that nonfarm payrolls rose 29,000 in September and the unemployment rate was 4.2%, with both described as having "changed little." The release says the 29,000 gain followed "an average monthly gain of 45,000 over the prior 12 months," that "employment in all major industries changed little over the month," and that the unemployment rate "has remained in a narrow range of 4.1 percent to 4.3 percent since March." Revisions cut July to a loss of 10,000 from a gain of 21,000 and August to 133,000 from 162,000, so that "employment in July and August combined is 60,000 lower than previously reported." Average hourly earnings rose 0.1% on the month and 3.0% over the year, to $37.81.

The inflation data cut the other way. ISM's September Prices Index, released Oct. 1, jumped 6.8 points to 77.9%, with 58.6% of manufacturing respondents reporting higher prices, up from 46.2% in August, per the release. BEA reported Sept. 30 that the PCE price index rose 3.4% over the 12 months to August and the core index 3.0%. Both releases are covered in detail elsewhere on this site today.

Governor Michael Barr spoke at the Detroit Economic Club on Sept. 29, before either the ISM or the jobs report, and his reading of the inflation record was blunt: "I count only two months of data consistent with 2 percent core PCE inflation over the past 20 months. And I don't yet see a clear trend toward a timely return to 2 percent." He framed the September hike as a rebalancing: "Risks to achieving our inflation target have increased, while risks to the labor market have receded, so we need to recalibrate policy to get us in a better position that more evenly balances risks to both components of our dual mandate." Then the sentence on the path: "In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion."

Barr's labor-market description predates Friday's report. He said "Job creation has averaged around 80,000 a month this year, close to reasonable estimates of its breakeven pace, and the unemployment rate of 4.1 percent is close to many estimates of maximum sustainable employment." The 4.1% was August's; BLS now prints 4.2% for September, and the July and August levels he was working from have since been revised down by a combined 60,000. Whether that changes his base case is not something his speech can tell us.

Vice Chair Philip Jefferson spoke at the University of Virginia's Darden School of Business on Oct. 1, the day of the ISM release and the day before the jobs report; the speech text does not say which he had seen. He supported the September hike as "an important step to ensure longer-term inflation expectations remain well anchored," and said he sees "upside risks to inflation" while viewing risks to activity and employment as "roughly balanced." His inflation diagnosis singled out the AI buildout: "The boom in AI-related demand is driving unusually strong increases in the cost of producing related goods and services, contributing to the rise in core goods prices." He added that "survey-based short-term measures of inflation expectations are elevated" while "most measures of longer-term inflation expectations, however, have remained stable at levels consistent with 2 percent inflation."

On the path from here, Jefferson's language was more conditional than Barr's. "As we look ahead, my view is that any future adjustments in policy should be determined by carefully examining trends in the data, the evolving outlook, and the balance of risks," he said. "Since our September meeting, yields across the term structure have increased further, a sign that investors are reassessing the evolving macroeconomic landscape. My colleagues and I will need to come to our own judgment, which may take more time. I will continue to assess whether underlying trends suggest that inflation will return to target with sufficient speed." He also noted that the unemployment rate "ticked down to 4.1 percent in August" and that he views "that level as near maximum employment"; the September print is 4.2%.

Jefferson's Sept. 22 remarks at the Treasury Market Conference were about discount-window modernization, not the rate path; they described the window as "a shock absorber during periods of market stress by reducing the risk of forced sales of Treasury securities" and did not discuss the policy rate or the economic outlook.

The yield move Jefferson referred to is visible in Treasury's own par yield curve, which carries a date on every row. On Sept. 16, the day of the hike, Treasury's par rates were 4.74% for the 2-year, 5.01% for the 10-year and 5.35% for the 30-year. On Oct. 1 they were 4.78%, 5.24% and 5.61%: on our arithmetic, 4 basis points at the front end and 23 and 26 at the 10- and 30-year points, a steepening with the policy rate unchanged. The Sept. 30 row was higher still, at 4.88%, 5.29% and 5.64%; Treasury's table does not yet carry an Oct. 2 row.

What the market is pricing for Oct. 27-28 is the obvious next question, and we are not going to answer it with a number. CME Group's FedWatch tool is the usual reference, but we could not obtain a reading carrying its own as-of time on Friday morning, and we do not quote a probability without the time the page attached to it. We note only that Treasury's 6-month par rate, a maturity that covers the October and December meetings, rose from 4.22% on Sept. 16 to 4.27% on Oct. 1, and that, on the arithmetic above, the committee's own year-end range runs from no further hikes to two.

The October meeting is confirmed for Oct. 27-28 on the Board's FOMC calendar, with no Summary of Economic Projections attached; the next SEP comes with the Dec. 8-9 meeting. Before then the committee will see September CPI and PPI and the minutes of the September meeting, whose release date the calendar page does not yet show. BEA's September PCE report is scheduled for Oct. 29, a day after the decision, and the October jobs report for Nov. 6. Two governors have told us how they weigh the evidence to date; neither has yet said what Friday's 29,000 does to that weighing.