Does the Fed raise interest rates again before 2027?

The Federal Reserve has finally moved off its long hold, and the market is already pricing the next step. On September 16, Chairman Kevin Warsh and a unanimous 12–0 committee lifted the target range for the federal funds rate to 3.75%–4.00%, the first increase since 2023. Polymarket now runs a contract on whether the Fed hikes again before year‑end. “Yes” trades at 84 cents, implying a high probability of at least one more move in the remaining two scheduled meetings, October 27–28 and December 8–9.

The committee itself stopped short of promising anything. The post‑meeting statement said only that the hike “will support a timelier return to the Committee’s 2 percent goal,” with no explicit language about further tightening. The forward guidance lives instead in the projections.

18 FOMC participants submitted their individual paths for the funds rate. The median projection ends 2026 at 4.1%, a quarter‑point above the new range. The full set of forecasts spans 3.9% to 4.4%, and the central tendency, which excludes the three highest and three lowest estimates, also starts at 4.1%. In other words, no more than three of the 18 officials think the Fed is done for the year.

The driver is inflation. The same summary of economic projections puts headline PCE inflation at 3.7% for 2026 and core PCE at 3.4%, both close to double the 2% target, while unemployment sits at 4.1%. Warsh underlined that view at the press conference, saying, “The plain fact is that inflation is too high and has been for too long.”

Even so, this committee has been slow to act. It held rates steady through five straight meetings into the summer. At the July meeting, three reserve bank presidents, Beth Hammack, Neel Kashkari, and Lorie Logan, dissented in favor of a hike and were outvoted 9–3. Warsh himself declined to attach his own dot to the latest projection, telling reporters the dot plot “reflects the views of my colleagues on the Committee, but, as in June, I have not offered a projection of my own.”

He did, however, restate the test he set at Jackson Hole: the committee “must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.” Two more soft core inflation readings before December would meet that bar and could open the door to another hike.

For “No” to win, inflation would need to cool quickly enough over the next nine weeks to reassure a chairman who has just called it too high for too long, and at least 15 of 18 officials would need to vote against the forecasts they filed last week. That is a tall order. Which is why we are buying “Yes” at 84 cents for a 19.05% return.