• KResearch still expects the Fed to hold its policy rate steady at 3.50-3.75 percent at the Federal Open Market Committee (FOMC) meeting on September 15-16, 2026, despite growing market expectations of a rate hike. However, the Fed is likely to signal its readiness to raise rates should inflationary pressures remain elevated.
• Headline inflation in August 2026 held steady at 3.4 percent YoY, in line with market expectations, showing no clear signs of reacceleration. This should pave the way for the Fed to opt to hold interest rates steady at its September meeting, particularly against the backdrop of tighter overall financial conditions resulting from a sharp rise in US Treasury yields.
• KResearch continues to expect the Fed to deliver one rate hike during the remainder of 2026 to curb inflationary risks stemming from elevated energy prices and persistently sticky core inflation, provided inflationary pressures do not accelerate significantly beyond expectations. That said, such a rate increase is unlikely to mark the beginning of a new monetary tightening cycle.
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