Fed’s September Hike Puts December Back in Play
The US Federal Reserve’s first interest-rate increase in three years may be followed by another move before the end of 2026, according to Nigel Green, CEO of independent financial advisory firm deVere Group.The Federal Open Market Committee voted unanimously on September 16 to raise the federal fund
The Federal Reserve's decision to raise interest rates for the first time in three years has reignited speculation about potential further hikes before the end of 2026, according to Nigel Green, CEO of financial advisory firm deVere Group. On September 16, the Federal Open Market Committee unanimously voted to increase the federal funds rate by 25 basis points to a target range of 3.75% to 4%.
Green stated that while the recent rate hike was relatively straightforward, the real challenge lies ahead. He believes the Fed will make a second increase in December, countering those who expect only one rate hike this year. Green attributes this potential change in outlook to persistent inflation, stronger labor market data, and higher crude oil prices.
Fed Chair Kevin Warsh's shift in tone since the Jackson Hole symposium suggests that policymakers are increasingly focused on inflation risks. The Fed's updated economic projections indicate a possible further tightening of monetary policy. The median projection for the federal funds rate at the end of 2026 is now 4.1%, slightly above the current midpoint of 3.875%.
Twelve out of 18 officials projected a year-end rate of 4.125%, consistent with an additional quarter-point increase. Four officials projected 4.375%, hinting at the possibility of two more hikes, while two expect the rate to remain near the current level. These projections represent individual assessments and do not guarantee a December increase.
The Fed will continue to monitor inflation, employment, economic activity, and the impact of geopolitical developments on energy prices before making its next decisions. The central bank has also extended its economic projections through 2029, showing the federal funds rate staying at 4.1% in 2027, decreasing to 3.9% in 2028, and 3.6% in 2029.
This suggests policymakers anticipate relatively restrictive monetary conditions. For investors, another rate hike would intensify the pressure on long-duration bonds, as rising yields lead to falling prices for existing fixed-rate bonds, with longer-dated securities being more sensitive. A higher US interest-rate path could also bolster the dollar, affecting investments not hedged against currency fluctuations and increasing repayment costs for entities carrying dollar-denominated debt.
These consequences extend beyond financial markets to mortgages, corporate refinancing, and variable-rate business loans. Companies and households that treat the September decision as the peak of the rate cycle might underestimate future financing costs. The upcoming December meeting will determine whether the Fed's latest rate hike was a limited adjustment or the start of a more extended tightening phase.
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