--- title: "The Fed Is Caught. The Market Has Already Made Most of the Decision for It." slug: fed-caught-rate-decision-sep2026 date_published: 2026-09-14T10:00:00.000Z original_url: https://www.tigzig.com/post/fed-caught-rate-decision-sep2026 source: fresh processed_at: 2026-09-14T10:00:00.000Z --- # The Fed Is Caught. The Market Has Already Made Most of the Decision for It. The Fed meets on Wednesday and the market has already made most of the decision for it. A quarter point rise sits at 86 per cent on the CME FedWatch tool, against 33 per cent a month ago, and the three month Treasury bill is already at 4.00 per cent, which is exactly where that rise would put the top of the Fed's range. Over the past year the ten year Treasury rose 91 basis points and the inflation protected version of the same bond rose 86. The gap between the two is the inflation rate the market expects, and it moved 5 basis points. So almost the whole rise in the ten year is the real cost of money, and the bond market has barely changed its view on inflation. That cost gets paid whether the Fed moves on Wednesday or holds. Consumers pay it on mortgages and car loans, companies pay it when they refinance, and governments pay it on every bond they roll over. A rate rise also does not reach what is pushing prices up. Diesel is up 59.8 per cent over the year and petrol 30.8. Higher interest rates reduce demand for credit. They do not produce oil and they do not reopen a shipping lane. My previous analysis, [Bond markets are sounding an alarm](https://www.tigzig.com/post/bond-markets-alarm-sep2026), goes into the consequences of a high rate regime for consumers, organizations and governments, with potential to trigger recessions and corrections across asset classes. All prior analysis: [tigzig.com/analysis](https://www.tigzig.com/analysis) ## There is politics around this, but the arguments are real The President, the Vice President and the Treasury Secretary have each said in public that the Fed should not raise, and in some cases that it should cut. That is a broader campaign than the usual one and it comes two months before the midterms. The Treasury Secretary's argument is a technical one, and my own analysis gets to the same place from the data. A central bank does not normally raise into a supply shock until the second and third round effects show up. Reported by [CNBC](https://www.cnbc.com/2026/09/05/trump-warsh-fed-september-rate-hike.html). Fed Chairman Kevin Warsh has an answer to that, and it is in his [Jackson Hole keynote from 28 August](https://www.federalreserve.gov/newsevents/speech/warsh20260828a.htm). He makes the case on breadth and duration. Over twelve months 54 per cent of the goods and services in the PCE basket rose by more than 3 per cent, against 32 per cent in the two decades before the pandemic, and he counts 65 months of sustained, elevated inflation. Two things in the same speech go the other way. He says inflation expectations are well anchored right now, which is what the bond market is saying too, though he immediately adds that they must be closely minded and that such measures tend to look strong and durable until they do not. And he gave no guidance at all about Wednesday. ## What I have written as the data came out On bonds and rates, where this one started. The US thirty year is at 5.37 per cent and before this year it had not been above 5.2 since 2007. - [Bond markets are sounding an alarm](https://www.tigzig.com/post/bond-markets-alarm-sep2026) - [Many of these macro charts are showing the same thing](https://www.tigzig.com/post/macro-signals-back-at-2007-levels-sep2026) - [S&P at 7,400. Irrational exuberance.](https://www.tigzig.com/post/sp500-irrational-exuberance-7400-may2026) On the AI build. - [Three warnings on the AI valuation boom](https://www.tigzig.com/post/ai-boom-warnings-jul2026) - [A correction in AI valuations is looking more likely](https://www.tigzig.com/post/ai-valuation-correction-aug2026) And regulators have been warning. - [The FSB chair is not hedging](https://www.tigzig.com/post/fsb-chair-bailey-warning-sep2026) On credit, where the pressure shows up in the numbers first. - [US banks had $2.8 trillion committed to non-bank lenders](https://www.tigzig.com/post/us-banks-nonbank-lending-q2-2026) - [FDIC Q2 2026 bank credit, in TREMOR](https://www.tigzig.com/post/fdic-q2-2026-bank-credit-tremor-aug2026) The rate series in the deck are from the TREMOR app, [tigzig.com/tremor](https://www.tigzig.com/tremor), sourced from public sources like FRED, FDIC and others. :::image-deck folder: /files/FED_IS_CAUGHT_SEP2026 pdf: /files/FED_IS_CAUGHT_SEP2026.pdf title: The Fed is caught, September 2026 ::: --- ## Full analysis transcript (extracted from PDF deck) _This text was extracted from the source PowerPoint deck. Chart visuals are in the PDF and slide images on the HTML page._ ## Slide 1 TIGZIG MACRO ANALYSIS Federal Reserve rate decision FOMC meeting, Wednesday 16 September 2026 The decision is already made Neither Warsh nor Trump. The markets have already decided. Wednesday either signs on it, or leaves the Fed beside the point. Over the past year the Fed cut three times, **75 basis points**, and every Treasury maturity beyond three months went the other way. Inside What Treasury bills now pay How much of it is inflation Fuel prices, and what rates do What a rise does reach The politics, and the argument Fed funds -70 the Fed's own rate 3 month bill -9 three months ahead 2 year Treasury +102 10 year Treasury +91 30 year Treasury +68 Twelve months to September 2026 **Change in yield over twelve months, basis points.** Data from FRED via TREMOR Amar Harolikar, ACA Decision Sciences & Applied AI **14 September 2026**tigzig.com --- ## Slide 2 TIGZIGThe instrument The instrument ## The three month bill is already pricing a rise **The three month bill prices what the market expects the Fed to do over the next three months.** A year ago it yielded 4.09 per cent against fed funds at 4.33, below the Fed because cuts were expected. Today it is 4.00 against 3.63, above the top of the target range. 3.7% 4.2% 4.7% 5.3% Jan 2026 the bill goes above Fed funds 3.63% 3 month bill 4.00% Sep 2024 to Sep 2026 **Fed funds effective rate and the three month bill.** Data from FRED via TREMOR A quarter point rise would put the top of the range at 4.00, which is where the bill already is. The market has priced one and no more. **The two crossed on 12 January 2026** and the bill has stayed above ever since, and decisively above since July, when the gap first passed 25 basis points. Sources[FRED](https://fred.stlouisfed.org/) daily, via [TREMOR](https://www.tigzig.com/tremor). [Target range](https://fred.stlouisfed.org/series/DFEDTARU) from the Federal Reserve Amar Harolikar** · **[TIGZIG](https://www.tigzig.com) 02 / 11 --- ## Slide 3 TIGZIGWhat the long end is pricing What the long end is pricing ## Almost none of the rise is inflation **The Treasury sells two kinds of ten year bond, and the gap between them is the inflation rate the market expects.** One pays a fixed 4.95 per cent. The other, TIPS, pays 2.55 plus whatever inflation turns out to be. A buyer is indifferent between them at 2.40 per cent inflation, and that is the market's number. Sep 2025 Sep 2026 Change Ten year Treasury 4.04% 4.95% +91bp Ten year TIPS, the real yield 1.69% 2.55% +86bp The gap, expected inflation 2.35% 2.40% +5bp **The whole rise in the ten year is the real cost of money.** The bond market has repriced borrowing and has not repriced inflation, at any horizon: five year, five year forward expectations moved four basis points. **The Chair says the same thing from the other side.** Medium term inflation expectations, in his words, by and large look stable. Sources[FRED](https://fred.stlouisfed.org/), daily. DGS10, DFII10 and T10YIE. The gap is FRED's own published breakeven and it reproduces exactly as the first row less the second Amar Harolikar** · **[TIGZIG](https://www.tigzig.com) 03 / 11 --- ## Slide 4 TIGZIGFuel Fuel ## A rise does not reach the cause **Higher interest rates reduce demand for credit. They do not produce oil, and they do not reopen a shipping lane.** The Fed sets its two per cent target on PCE inflation, which is 3.7 per cent. Take out food and energy and it is 3.3. On the consumer price index the core reading is 2.5. Diesel, at the pump +59.8% $5.97 a gallon Brent, front month +57.3% $104 a barrel Petrol, at the pump +30.8% $4.16 a gallon Energy commodities +28% motor fuel and heating oil Energy, all of it +16.1% electricity and gas too Producer prices, core +4.6% still in the pipe PCE inflation +3.7% what the Fed targets, at 2% PCE, core +3.3% Consumer prices, core +2.5% Fuel to Sep 2026, consumer and producer prices to Aug 2026 **Change over twelve months.** Data from FRED and EIA via TREMOR In August alone the gasoline index rose 3.9 per cent while all items rose 0.4. SourcesConsumer prices are BLS series, taken from [FRED](https://fred.stlouisfed.org/) via [TREMOR](https://www.tigzig.com/tremor). Fuel is the [EIA weekly fuel survey](https://www.eia.gov/petroleum/gasdiesel/), FRED series GASDESW and GASREGW, weekly to 7 September 2026. PCE is [from the BEA](https://www.bea.gov/data/personal-consumption-expenditures-price-index) Amar Harolikar** · **[TIGZIG](https://www.tigzig.com) 04 / 11 --- ## Slide 5 TIGZIGThe pipeline The pipeline ## The cost has not fully reached the consumer **Diesel is the number to watch.** Gasoline is something households buy, so it shows up in the headline figure and central banks are expected to look through it. Diesel is what moves freight, farms and building sites. It arrives later, inside the price of everything carried. Producer prices excluding food and energy are rising at 4.6 per cent. The core consumer measures are 2.5 on the consumer price index and 3.3 on PCE. Producer prices are above both of them. Producer prices are the costs businesses are already paying. Consumer prices are what those businesses have charged on to the consumer. Producer prices are above both consumer measures, so a part of this cost has not been passed on yet. None of this has finished. Fuel costs are far above last year and more of that cost is still to come. SourcesProducer and consumer prices from BLS, [FRED](https://fred.stlouisfed.org/) series via [TREMOR](https://www.tigzig.com/tremor), to August 2026. Diesel and gasoline are the [EIA weekly fuel survey](https://www.eia.gov/petroleum/gasdiesel/), FRED series GASDESW and GASREGW Amar Harolikar** · ** [TIGZIG](https://www.tigzig.com) 05 / 11 --- ## Slide 6 TIGZIGThe AI hyperscalers The AI hyperscalers ## Promised, and not yet borrowed **The hyperscalers have committed 2.9 trillion dollars they have not paid for.** Total capital spending by the five was 184 billion in the June quarter, so a large part of this is still ahead of them, though [JP Morgan Asset Management](https://am.jpmorgan.com/lu/en/asset-management/per/insights/market-insights/market-updates/on-the-minds-of-investors/hyperscaler-debt-issuance-ai-buildout/) says a substantial part of the purchase commitments already sits inside near term capex expectations. AI purchase commitments unconditional, the hyperscalers $1,500bn Data centre lease obligations most of it off balance sheet $1,400bn $184bn of capital spending last quarter **Promised and not yet paid for, $bn. The source gives no period.** The red bar is total capital spending by the five in the June quarter, covering everything they build None of it is borrowed yet. What it costs is set in the bond market when each piece is drawn, and that repricing has already happened. [JP Morgan Asset Management](https://am.jpmorgan.com/lu/en/asset-management/per/insights/market-insights/market-updates/on-the-minds-of-investors/hyperscaler-debt-issuance-ai-buildout/) calls the recent rise in the cost of debt a marginal headwind and says it is not expected to change capex plans. That is the cost of issuance already planned. This is the part that is not. SourcesCommitments and spreads from [JP Morgan Asset Management](https://am.jpmorgan.com/lu/en/asset-management/per/insights/market-insights/market-updates/on-the-minds-of-investors/hyperscaler-debt-issuance-ai-buildout/), 20 August 2026. Capital spending from [SEC filings](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001341439&type=10-Q&dateb=&owner=include&count=10) Amar Harolikar** · **[TIGZIG](https://www.tigzig.com) 06 / 11 --- ## Slide 7 TIGZIGThe pressure The pressure ## The whole administration is pushing one way The politics is obvious. The argument underneath it is a real one, and this analysis gets to the same place from the data. **The President, the Vice President and the Treasury Secretary have each said in public that the Fed should not raise, and in some cases that it should cut.** That is a broader campaign than the usual one, and it comes two months before the midterms. The Treasury Secretary's argument is a technical one, and it is the argument this analysis comes back to: a central bank does not normally raise into a supply shock until the second and third round effects show up. Whether those effects have arrived is the real disagreement, and the Chair has an answer. The pressure has not moved the market for three month Treasury bills. Those are short term government debt, and they had already moved before any of this campaign started. **A month ago the market put a quarter point rise at 33 per cent. It is now 86.5.** It was 59 in the first week of September. CME FedWatch, 14 September. Sources[Reported by CNBC](https://www.cnbc.com/2026/09/05/trump-warsh-fed-september-rate-hike.html), 5 September 2026. Odds from the CME FedWatch tool, 14 September. Meeting dates from the [Federal Reserve](https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm) Amar Harolikar** · **[TIGZIG](https://www.tigzig.com) 07 / 11 --- ## Slide 8 TIGZIGThe other side The other side ## What the Chair actually said **His case is that the rise is broad and that it has lasted.** Over the past twelve months 54 per cent of the PCE basket rose by more than 3 per cent. Before the pandemic that figure was 32 per cent. He counts 65 months of sustained, elevated inflation. PCE is 3.7 per cent over twelve months and 4.1 over six, so on his own gauge it is accelerating. He reads the labour market as consistent with full employment, which removes the argument that there is slack to absorb a shock. Two things in the same speech are a different angle. Medium-term inflation expectations, in his words, by and large look stable, and swap market inflation compensation says the same. And he gave no guidance at all. His own words were that he stands **"committed to a discipline, not to a decision."** Wednesday is a projections meeting, so the Committee publishes rate projections from its members alongside the decision. The Chair did not submit one of his own in June, and he has said that publishing forecasts to show how the Fed will react works better in theory than in practice. SourcesAll figures from [the speech in full](https://www.federalreserve.gov/newsevents/speech/warsh20260828a.htm), 28 August 2026. Meeting and projection dates from the [Federal Reserve](https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm) Amar Harolikar** · **[TIGZIG](https://www.tigzig.com) 08 / 11 --- ## Slide 9 TIGZIGMy read My read ## Where I come out I am not going to call the decision. What I would say is that the decision counts for less than it looks, because the market has already made most of it. Whether the Fed raises on Wednesday or holds, bond yields have already risen, and somebody pays for that. Consumers pay it on mortgages and car loans. Companies pay it when they refinance. Governments pay it on every bond they roll over. I wrote about this at the start of September. [Bond markets are sounding an alarm](https://www.tigzig.com/post/bond-markets-alarm-sep2026) The thirty year was at 5.25 per cent, a level it had not passed since 2007, and Europe and Japan are moving the same way. That piece sets out the pressures arriving together: valuations, AI debt, delinquencies and charge-offs, oil, private credit and employment. SourcesThis page is my own view. Everything before it is sourced and linked, and my earlier analysis is at [tigzig.com/analysis](https://www.tigzig.com/analysis) Amar Harolikar** · ** [TIGZIG](https://www.tigzig.com) 09 / 11 --- ## Slide 10 TIGZIGPrevious analysis ## Previous analysis Bonds and rates Sep 2026 [Bond markets are sounding an alarm](https://www.tigzig.com/post/bond-markets-alarm-sep2026) Sep 2026 [Macro charts back at the levels they showed before 2007](https://www.tigzig.com/post/macro-signals-back-at-2007-levels-sep2026) Jun 2026 [There is no modern playbook for this](https://www.tigzig.com/post/us-inflation-shock-no-modern-playbook-jun2026) The AI build and how it is funded Jul 2026 [Three warnings on the AI valuation boom](https://www.tigzig.com/post/ai-boom-warnings-jul2026) Aug 2026 [A correction in AI valuations looks more likely](https://www.tigzig.com/post/ai-valuation-correction-aug2026) What the regulators are saying Sep 2026 [The FSB Chair is not hedging](https://www.tigzig.com/post/fsb-chair-bailey-warning-sep2026) Jun 2026 [The BIS red-flagged the AI boom](https://www.tigzig.com/post/bis-ai-boom-red-flag-central-banks-jun2026) Credit Aug 2026 [US banks, 2.8 trillion committed to non-banks](https://www.tigzig.com/post/us-banks-nonbank-lending-q2-2026) Aug 2026 [NY Fed Q2 household debt, auto and mortgage went up](https://www.tigzig.com/post/nyfed-household-debt-q2-2026) Aug 2026 [FDIC Q2 2026, 102 quarters of bank balances on TREMOR](https://www.tigzig.com/post/fdic-q2-2026-bank-credit-tremor-aug2026) May 2026 [Private credit. A market for lemons](https://www.tigzig.com/post/private-credit-market-for-lemons-may2026) Valuations Aug 2026 [Shiller CAPE at 41.2, higher only at the dot-com peak](https://www.tigzig.com/post/tremor-monthly-update-aug2026) May 2026 [S&P at 7,400. Irrational exuberance](https://www.tigzig.com/post/sp500-irrational-exuberance-7400-may2026) All my analysis [tigzig.com/analysis](https://www.tigzig.com/analysis) Amar Harolikar** · ** [TIGZIG](https://www.tigzig.com) 10 / 11 --- ## Slide 11 TIGZIGSources ## External sources This analysis also draws on my earlier work. These are the external sources used. Federal Reserve [H.15 rates and the FOMC calendar](https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm) Federal Reserve [Warsh at Jackson Hole, 28 August 2026](https://www.federalreserve.gov/newsevents/speech/warsh20260828a.htm) SEC [Quarterly filings for the five hyperscalers](https://www.sec.gov/edgar/searchedgar/companysearch) JP Morgan Asset Management [Hyperscalers, now also a credit story, 20 August 2026](https://am.jpmorgan.com/lu/en/asset-management/per/insights/market-insights/market-updates/on-the-minds-of-investors/hyperscaler-debt-issuance-ai-buildout/) Vanguard [The AI buildout comes to the bond market](https://corporate.vanguard.com/content/corporatesite/us/en/corp/vemo/ai-buildout-comes-to-bond-market.html) CNBC [Trump turns up the heat on Warsh, 5 September 2026](https://www.cnbc.com/2026/09/05/trump-warsh-fed-september-rate-hike.html) EIA [Weekly retail fuel survey](https://www.eia.gov/petroleum/gasdiesel/) BEA [Personal consumption expenditures price index](https://www.bea.gov/data/personal-consumption-expenditures-price-index) Series in the charts [BLS, FRED and Yahoo Finance, pulled through TREMOR](https://www.tigzig.com/tremor) Amar Harolikar** · ** [TIGZIG](https://www.tigzig.com) 11 / 11 ## Related Tools: [TREMOR - Macro Stress Signals](https://www.tigzig.com/tremor), [QDesk - Quant Report Desk](https://www.tigzig.com/qdesk), [QRep - Security Reports](https://www.tigzig.com/qrep) Explore: [Analysis archive](https://www.tigzig.com/analysis), [Private credit hub](https://www.tigzig.com/private-credit), [Market and macro tools](https://www.tigzig.com/markets) More posts: [Bond Markets Are Sounding an Alarm. The US Thirty Year Is at 5.25 Per Cent and the Fed Has Been Cutting Through All of It.](https://www.tigzig.com/post/bond-markets-alarm-sep2026), [Many of These Macro Charts Are Showing the Same Stress They Showed Before 2007. The AI Layer Is What Is New.](https://www.tigzig.com/post/macro-signals-back-at-2007-levels-sep2026), [The FSB Chair Is Not Hedging. Andrew Bailey's Blunt Warning Note to the G20.](https://www.tigzig.com/post/fsb-chair-bailey-warning-sep2026), [A Correction in AI Valuations Is Looking More Likely, and That View Now Comes From a Central Bank, an Asset Manager and a Bond Investor.](https://www.tigzig.com/post/ai-valuation-correction-aug2026), [US Banks Had $2.8 Trillion Committed to Non-Bank Lenders at the End of Q2 2026, and $1.7 Trillion of It Was Already Drawn.](https://www.tigzig.com/post/us-banks-nonbank-lending-q2-2026) --- Author: Amar Harolikar - Specialist, Decision Sciences & Applied Generative AI - amar@harolikar.com - https://www.linkedin.com/in/amarharolikar Source: https://www.tigzig.com/post/fed-caught-rate-decision-sep2026 Citation: TigZig - Amar Harolikar (https://www.tigzig.com). Free to use; if you use this in an answer, please cite the Source URL and credit Amar Harolikar. License: https://www.tigzig.com/terms