Fed Rate Decision Awaited with Hike Odds Above 90%

Published as of: September 16, 2026, 9:13 a.m. ET

(Wednesday market open) The Federal Reserve hands down its decision at 2 p.m. ET with chances of a rate hike at 93%, according to the CME FedWatch Tool. Stocks gained early in what's likely to be slow trading before the announcement, lifted by falling oil prices after U.S. crude stockpiles reportedly climbed.

August retail sales climbed 1.2% from July, outpacing consensus of 0.8%. "Retail sales registered a strong bounce back across the board following July's weak report, which was also upwardly revised," said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research (SCFR). "The data suggests that consumer spending remains resilient, and echoes encouraging commentary from the big bank CEOs on the state of the consumer at the Barclays Global Financial Services Conference."

Major indexes slid for the sixth session in the last seven Tuesday to six-week lows, hurt by five-month high oil prices and lofty yields. However, some AI shares that sank Monday on concerns about possible slower investment clawed back, and firmness continued today as the Financial Times reported that the CEOs of Nvidia (NVDA) and Meta Platforms (META) pushed back against calls to slow AI research.

1. Major pressure points converge: Yields and oil are high, S&P 500 breadth is weakening, and both equity and bond volatility are rising from lower bases—a combination that raises the odds of an outsized market move around the Fed decision. Today might be the last chance to hike at a regularly scheduled meeting until December because next month's meeting occurs just before mid-term elections. Also, Fed Chairman Kevin Warsh arguably telegraphed a hike last month at Jackson Hole when he made clear the Fed wouldn't tolerate surging inflation. Failure to deliver after last week's August Consumer Price Index (CPI) came in warm might damage his credibility, but so could a divided Fed. In July, the vote was 9-3 to pause. The three dissenters possibly remembered 2021 and 2022 when the Fed delayed hikes and then wrestled with spiking inflation triggered by Russia's attack on Ukraine and post-pandemic supply chain tangles. A split vote is possible considering recent dovish words from Fed Gov. Christopher Waller. Some analysts still caution against hikes, noting lackluster labor conditions, high mortgage rates, and core annual CPI near five-year lows.
    
2. Fed projections awaited: Numbers to watch at 2 p.m. include the Fed's Personal Consumption Expenditures (PCE) price projections. The June headline and core estimates were 3.6% and 3.3%, respectively, for 2026. Core excludes food and energy. For 2027, they were 2.3% and 2.5%. Those are likely to rise. In addition, the Fed will provide updates on unemployment, gross domestic product, and its "dot plot" of rate projections. Last time, the average projection was for the Fed funds rate—now 3.5% to 3.75%—to end 2026 at 3.8%, meaning one rate hike. The 2027 projection was 3.6%, suggesting at least one cut. But the market has built in a dramatically tighter scenario than the Fed envisioned three months ago. CME trading projects the Fed to hike rates three to five times by next September, with the highest odds at around four hikes. That would take rates up 100 basis points to a range between 4.5% and 4.75%. Warsh doesn't like to project, but he may be asked about the dot plot today. Any forward signaling on his part will likely draw intense scrutiny as futures trading indicates 77% odds of a second hike before year-end.
    
3. Retail sales deeper dive: The breadth of today's retail sales report was solid. "Only one industry—building materials—was lower," said Kevin Gordon, head of macro research and strategy at SCFR. "The services economy isn't slowing. Retail sales for restaurants and bars jumped by 1.2% month over month in August, the seventh consecutive monthly increase." Control group retail sales, excluding gas station sales and some other metrics, rose 1.4%, and feeds into the government's gross domestic product (GDP) estimate. The most recent Atlanta Fed GDPNow estimate for third quarter GDP growth on a seasonally adjusted annual basis was 4.4%, and an update is due later today. It could be interesting to see if today's data pushed that higher, though the average analyst estimate is still below 3%.

• SK Hynix (SKHY) and Intel (INTC) both popped 3% early on a Reuters report that the two firms discussed a potential partnership that would involve SK Hynix producing memory chips in the U.S. for the first time. SK Hynix later said no plans have been confirmed.
   
• J.B. Hunt Transport Services (JBHT) slid 11% ahead of the open. This came as Barron's reported that the company expects third quarter profit to drop 5% to 10% sequentially due to higher costs.
   
• August U.S. export and import prices rose 0.6% and 0.7%, respectively, the U.S. Bureau of Labor Statistics said today.
   
• Small caps have been hit hard by higher yields. The Russell 2000^® Index (RUT) closed at a three-month low yesterday.
   
• Circle Internet Group (CRCL), Coinbase (COIN), and Strategy (MSTR) all fell sharply Tuesday and bitcoin dropped 3.7% after the failure of a Senate procedural vote on the Clarity Act, which would establish a new regulatory framework for cryptocurrencies and other digital assets.
   
• Apple (AAPL) fell slightly Tuesday after a GF Securities analyst reported "lukewarm demand" for iPhone 18 Pro models three days after pre-orders began.
   
• Qualcomm (QCOM) rose 4% Tuesday as StoneX reiterated its buy rating a week after Qualcomm announced an AI chip deal with Amazon (AMZN).
   
• Skyworks Solutions (SWKS) jumped 13.5% Tuesday as the CEO of the Apple supplier said he was confident a pending merger with Qorvo (QRVO) would close soon, Barron's reported.
   
• Axon Enterprise (AXON) fell almost 10% Tuesday after announcing plans to raise $1 billion in debt, Barron's said.

Washington update: As investors await today's Fed decision, they also might be keen to hear if Warsh sheds light on chances for multiple rate hikes this year, noted Michael Townsend, managing director of legislative and regulatory affairs at Schwab, in his latest Washington: What to Watch Now article. He also explored if President Trump's proposed $5,000 post-election dividend proposal has any chance of becoming reality, and discusses crypto legislation.

The MOVE Index (MOVE:GIF—candlesticks), sometimes called the "VIX for bonds," tracks expectations for future volatility in the fixed income market. It trades near 84, compared with the June low of 65, and trend lines (dotted lines) show it in a technical uptrend. Its 30-day negative correlation with the S&P 500 Index has jumped to nearly 60%. Higher bond volatility widens the range of discount-rate outcomes and makes equity valuations more fragile.

Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week.

September 17: August housing starts and building permits.
September 18: Bank of Japan rate decision, August industrial production, and Conference Board August leading indicators.
September 21: No major earnings or data expected.
September 22: Earnings expected from AutoZone (AZO) and KB Home (KBH).
September 23: Expected earnings from Cintas (CTAS), Paychex (PAYX), and General Mills (GIS).