A Quarter-Point Is Already Priced. The September Dot Plot Is What the Fed Still Has to Decide

by Tomas Ferreira · September 14, 2026

Markets Reporter, US Market Current

The Federal Open Market Committee convenes Tuesday and Wednesday, Sept. 15-16, with the outcome of the meeting itself among the least suspenseful things on the week's calendar. Federal funds futures put the probability of an increase in the target range at about 88 percent, a figure Barron's attributed to CME FedWatch in a story whose byline carries a stamp of 10:20 p.m. EDT on Saturday, Sept. 12. That stamp belongs to the article, not to the pricing snapshot inside it; the piece gives no time for when the 88 percent was observed. Even read loosely, it is a level that leaves the Committee very little room to surprise on the decision line without a disorderly repricing. The interesting part of Wednesday is what comes attached to it: a fresh Summary of Economic Projections, which the Board's 2026 meeting calendar marks against the September meeting, and a Chair who has spent his first months in the job arguing against the practice of telling markets in advance what he intends to do.

The starting point is a target range of 3-1/2 to 3-3/4 percent. The Committee's July 29 statement said it "decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent," and that decision was not unanimous. Beth M. Hammack, Neel Kashkari and Lorie K. Logan dissented, preferring, in the statement's words, to "raise the target range for the federal funds rate by 1/4 percentage point at this meeting." Three dissents in the hawkish direction at a meeting that held is an unusual configuration, and it is the single most concrete piece of evidence that Wednesday's move has been building inside the Committee rather than being imposed on it by the futures market.

The minutes of that July 28-29 meeting, released by the Board, put the internal split in plainer terms. "Several participants favored an increase of 25 basis points in the target range at this meeting," the minutes record. The forward-looking language was more pointed still: "Many participants assessed that policy tightening would likely be necessary if inflation did not decline." On the balance of risks, the minutes state that "Participants judged that their inflation outlooks were highly uncertain and that inflation risks were skewed to the upside," and that "Many participants noted that the recent re-escalation of the conflict in the Middle East significantly clouded the inflation outlook."

Inflation did not decline. The Bureau of Labor Statistics reported on Friday, Sept. 11 that the Consumer Price Index for All Urban Consumers rose 0.4 percent in August on a seasonally adjusted basis after rising 0.1 percent in July, and was up 3.4 percent over the 12 months before seasonal adjustment. The energy index rose 2.1 percent on the month and is up 16.3 percent over the year. Gasoline did most of the work: the BLS said the gasoline index rose 3.9 percent in August, "accounting for over one third of the monthly all items increase," and is up 27.4 percent over 12 months.

Here is the tension that Chair Kevin Warsh will have to talk through at 2:30 p.m. ET Wednesday, when the Board's September calendar lists the FOMC press conference. The same August report put the index for all items less food and energy up 0.3 percent on the month and 2.4 percent over 12 months. A central bank tightening because core inflation is running away from it would be making a familiar argument. A central bank tightening while its core measure prints a 2-handle is making a different one — that an energy shock will not stay confined to energy, and that the credibility cost of waiting to find out exceeds the growth cost of moving now.

Warsh has been making a version of that argument since August. In keynote remarks at the Jackson Hole Economic Policy Symposium on Aug. 28, he said that "The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank," and put a number on how widely the problem had spread: "Of goods and services in the PCE basket, 49 percent showed annualized price increases above 3 percent." His stated standard for stopping was explicit: "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed." He also used the speech to argue against standing forward guidance, which he noted his colleagues and he had adopted during the Global Financial Crisis. "It was essential at the time, and we introduced it with much fanfare," he said, before adding: "But, as with other legacies of crises past, I believe that the practice has overstayed its welcome." A chair who has disowned forward guidance still has to publish a dot plot on Wednesday, which is the closest thing to forward guidance the institution produces.

Economists have moved to meet the market. Reuters reported Monday, Sept. 14 that 86 of 101 economists polled expect a quarter-point increase on Wednesday, to a range of 3.75 to 4.00 percent. Stephen Juneau, senior U.S. economist at Bank of America, told Reuters that "Warsh kind of boxed himself into where the data needed to be very soft for the Fed not to follow through with a hike," adding: "We just didn't get that...then we got this inflation report and it was firmer." CBS News reported on Sept. 11 that CME FedWatch odds of a September increase had climbed to nearly 90 percent from about 70 percent the prior day, and quoted EY-Parthenon chief economist Greg Daco saying, "We are changing our Fed call from a hold to a 25bps hike at the FOMC meeting next week."

What the labor market is contributing to this debate is mostly silence. The BLS reported on Friday, Sept. 4 that total nonfarm payroll employment increased by 162,000 in August and that the unemployment rate was unchanged at 4.1 percent. June was revised up by 11,000 to a gain of 31,000 and July was revised up by 44,000 to a gain of 21,000, leaving the two months a combined 55,000 higher than previously reported. Average hourly earnings rose 10 cents, or 0.3 percent, to $37.75, and are up 3.1 percent over the year. Weekly claims tell the same story of low separations: the Labor Department reported on Sept. 10 that seasonally adjusted initial claims for the week ended Sept. 5 were 206,000, down 1,000, with the four-week moving average also at 206,000 and continued claims at 1,774,000 for the week ended Aug. 29.

A 3.1 percent pace of hourly earnings growth is not the wage spiral of a classic overheating episode, and that matters for how Wednesday's projections read. The last set of projections carried a median federal funds rate of 3.8 percent for the end of 2026, 3.6 percent for the end of 2027 and 3.1 percent in the longer run; the document itself is stamped "For release at 2:00 p.m., EDT, June 17, 2026." The 2026 medians showed PCE inflation at 3.6 percent, core PCE inflation at 3.3 percent, real GDP growth of 2.2 percent and an unemployment rate of 4.3 percent. That 3.8 percent median sits above the 3.625 percent midpoint of the range the Committee has been holding and a little below the 3.875 percent midpoint a quarter-point increase would produce. The June median, in other words, already leaned toward one more increase this year without quite landing on it. Wednesday would not take the Committee past what it told the public in June so much as carry it the last fraction of the way there.

That is why the September dots, not the decision, are the event. If the median for end-2026 moves up rather than simply being met, the Committee is signaling a sequence rather than an adjustment. Reuters reported that 37 of 70 forecasters expect at least one further increase by the end of March, and that interest rate futures were pricing roughly four increases by the end of July 2027. Scott Anderson, chief U.S. economist at BMO Capital Markets, framed the stakes for Reuters in terms of the institution rather than the economy: "The Fed's inflation-fighting credentials are on the line here. They have to back up their hawkish rhetoric with some real action at the upcoming meeting, or they do risk a much steeper Treasury yield curve."

The curve is already carrying a lot of that expectation. The 10-year note finished Friday, Sept. 11 at 4.96 percent and the two-year ended at 4.63 percent, according to Advisor Perspectives' yield snapshot for that date. The snapshot does not compute the spread; subtracting one from the other leaves 33 basis points, roughly a third of a percentage point, with the long end sitting well above a policy rate that has not yet moved. Juneau also told Reuters that "To some degree, Bessent's intervention at the long end of the curve also kind of contributed" to the repricing. Equities went into the meeting off their highs but not distressed: the S&P 500 closed Friday at 7,656.98, up 65.28 points or 0.9 percent, the Dow Jones Industrial Average at 52,573.29, up 509.19 points or 1 percent, and the Nasdaq composite at 26,333.04, up 251.31 points or 1 percent. On the week, the S&P 500 fell 0.8 percent, the Dow fell 1.6 percent and the Russell 2000 fell 2.4 percent; year to date the S&P 500 is up 11.9 percent and the Russell 2000 is up 17 percent.

The week's data calendar is arranged awkwardly around all this. The only macro releases that land before the decision arrive Wednesday morning, hours ahead of it. The Census Bureau publishes the advance estimate of August retail and food services sales at 8:30 a.m. ET Wednesday, per its own release schedule, and the BLS publishes August import and export price indexes at the same hour. The NAHB/Wells Fargo Housing Market Index follows at 10:00 a.m. Wednesday. None of those can plausibly change a decision that will already have been drafted, but all three can change what the Chair is asked about at 2:30.

Retail sales matter most for the demand half of the argument. The July advance report put total retail and food services sales at $763.6 billion, down 0.6 percent from June but up 5.0 percent from July 2025. That year-over-year figure is nominal, and with the CPI up 0.4 percent in August on gasoline alone, a nominal sales print does not settle whether households are buying more or simply paying more for fuel. A soft August number would hand the doves on the Committee a talking point on the morning of a meeting where they are outnumbered; a firm one removes the last argument for waiting.

Import prices are the more direct test of the mechanism the hawks are worried about. If an energy and tariff shock is going to leak into core goods, imported prices are where it shows up first, and the August index is the last reading the Committee will see before it votes. The Philadelphia Fed's August manufacturing survey already showed the input side cooling somewhat while staying elevated: the prices paid index fell about 13 points to 40.9 and prices received fell about 10 points to 17.7, though the Bank noted prices paid remained above its long-run nonrecession averages. That survey also produced a current general activity index of 47.4, its highest since April 2021, and a future activity index of 73.6, its highest since August 1983 — a reading that is hard to square with an economy in need of restraint, and equally hard to square with one that needs relief.

Housing is where the cost of tightening is already visible, and this week it straddles the decision: the builder index lands at 10:00 a.m. Wednesday, hours before the vote, while August starts and permits do not arrive until Thursday morning. The NAHB/Wells Fargo index stood at 35 in August, up one point from July, with prospective buyer traffic at 23. NAHB Chief Economist Robert Dietz said August "marked the 16th straight month that at least 30% of builders reported cutting prices to support demand, as well as the 16th consecutive month with the HMI below 40." Thirty-five percent of builders cut prices in August, by an average of 6 percent, and 63 percent used sales incentives. NAHB Chairman Bill Owens added that "Rising gas and diesel prices are pushing up material costs, and spec home building remains weak as many prospective buyers stay on the sidelines" — the same energy shock the Fed is preparing to tighten against, arriving at builders as a cost rather than as demand.

The Census Bureau releases August housing starts and building permits Thursday, Sept. 17 at 8:30 a.m. ET, and the July report it revises set a low bar: privately owned housing starts ran at a seasonally adjusted annual rate of 1,239,000, which Census reported as 12.4 percent below the revised June estimate and 13.5 percent below July 2025, with single-family starts at 808,000. Permits went the other way, at 1,443,000, up 5.0 percent from June and 3.1 percent above a year earlier. Starts and permits pointing in opposite directions is the signature of an industry that has entitlement in hand and is waiting on financing costs. Weekly jobless claims arrive the same morning — the Labor Department embargoes each week's release until 8:30 a.m. ET on Thursday — as does the Philadelphia Fed's September manufacturing survey, which the Bank's calendar lists for 8:30 a.m. Thursday.

The week closes Friday with the Federal Reserve's own G.17 release on industrial production and capacity utilization at 9:15 a.m. ET, per the Board's September calendar. The current G.17 shows industrial production up 0.2 percent in July with capacity utilization at 76.3 percent — a level that describes an industrial sector with slack, not one bidding up resources. Taken together, the releases on either side of Wednesday describe an economy whose inflation problem is concentrated in energy and whose weakness is concentrated in the interest-sensitive sectors a higher policy rate hits first.

None of that resolves the question the Committee has to answer, because the case for moving was never primarily about the current data. It is about whether 65 months of elevated inflation, in Warsh's framing, have loosened the anchor enough that a gasoline shock becomes something more durable. That is a judgment about expectations, and expectations are not on this week's calendar. What is on the calendar is a fresh set of projections Wednesday and a press conference the Board lists for 2:30 p.m. ET. The Board's September calendar gives a clock time for the press conference but none for the projections; June's were stamped for 2:00 p.m. The quarter point is priced. The path is not.