On September 16 the Federal Open Market Committee raised the federal funds target range by a quarter point to 3.75% to 4%, its first increase since 2023, on a unanimous twelve to zero vote. The effective rate has settled near 3.88%.

The hike itself was largely priced in. What was not priced in was the projection material published alongside it. The median dot now sits at 4.1% for the end of 2026 and 4.1% again for the end of 2027, which quietly deletes the easing cycle that markets had been carrying in their forecasts for more than a year.

A committee that is telling you it is not finished

Sixteen of the nineteen participants expect at least one further increase before the end of this year. Only eight see another in 2027. Chair Kevin Warsh was direct about the reasoning: inflation is still too high, and the committee wants a timelier return to the 2% goal than the current path delivers. The next meeting is October 28.

The rest of the projections explain the impatience. Participants see headline PCE inflation at 3.7% this year with core at 3.4%, unemployment at 4.1% and growth at 2.3%. For 2027 they pencil in headline at 2.3%, core at 2.5%, unemployment unchanged at 4.1% and growth at 2.4%.

Read that 2027 line again. Headline below core is an unusual forecast, and the only way it works is an energy assumption doing the heavy lifting. The Energy Information Administration currently sees Brent averaging around $91 a barrel this year and $74 next. A committee forecasting disinflation is, to a meaningful degree, forecasting cheaper oil.

What a 4.1% median does to the curve

Whitmore's Watchlist:
USFR (WisdomTree Floating Rate Treasury Fund): Treasury floaters that reset with the front end rather than fighting it.
FLOT (iShares Floating Rate Bond ETF): Investment grade floating rate corporates, the same idea with a credit spread attached.
MINT (PIMCO Enhanced Short Maturity Active ETF): Actively managed ultrashort, for cash that needs to stay cash.

The Treasury curve on September 21 read 4.02% on the three month bill, 4.76% at two years, 4.83% at five, 4.96% at ten and 5.29% at thirty. That is a curve with almost no slope between six months and ten years, and a front end that no longer prices a single cut.

For the last two years, holding duration was a bet on cuts as much as a bet on yield. That trade required the Fed to stop where it was and reverse. The September projections say it intends to do neither, which means anyone still long the long end is now being paid for the coupon alone.

Floating rate instruments sit on the other side of that. Their coupons reset upward as the policy rate rises, so they are one of the few fixed income assets that improve when the committee does exactly what it just said it would do.

The 2027 dots matter more than the 2026 dots

A near-term dot is a statement about this year's inflation prints, and it moves whenever the data move. The 2027 dot is something else. It is an estimate of where policy needs to sit once the current shock has passed, and moving it up is a statement that the neutral rate itself may be higher than the post-2008 decade taught everyone to assume.

If that is right, then every valuation framework built on a 2% funds rate and a 2% ten-year is carrying an assumption that no longer holds. Mortgage affordability, commercial property cap rates, the corporate maturity wall and the discount rate under long duration equities all reset to a different baseline.

It is also worth noting what a unanimous vote signals. This committee dissented three ways in July. Getting twelve votes for a hike means the internal argument about whether inflation or the labor market is the binding risk has been settled for now, and settled in favor of inflation.

Markets took the point. The ten-year climbed back toward 5% after the press conference before easing to 4.96% by the following Monday, and the dollar broke above 100 on the index for the first time in weeks.

Whitmore's Take: The quarter point was the smallest part of this meeting. The removal of 2027 cuts is the Fed telling you the resting level of rates is higher than you have been modelling. Worth checking which of your holdings need a cut to work.

Written by Daniel Whitmore
Millionaire Insiders