“The plain fact is that inflation is too high and has been for too long.” — Federal Reserve Chair Kevin Warsh, at his September 16, 2026 press conference

Good Morning! The Federal Reserve did something yesterday it had not done in three years: it raised interest rates. New chair Kevin Warsh, the man President Trump picked for the job, led a unanimous vote to tighten policy and signaled more hikes are coming. Trump responded within hours, posting that rates should be 1% or less. We break down what happened, why it matters for your wallet, and how markets took the news.

Also on the board this morning: stocks slid and the 10-year Treasury yield crossed 5% as the Fed's projections sank in, oil is still pinned near $100 a barrel as the Iran war chokes the Strait of Hormuz, and the Senate buried the crypto industry's flagship bill, sending bitcoin below $76,000. Plus, Korean Air just signed a $36 billion check to Boeing, and August retail sales came in hot right before the Fed meeting. Let's get into it.

FREE GAME OF THE DAY

Warsh's Fed Hikes for the First Time Since 2023, and Trump Fires Back

The Marriner S. Eccles Federal Reserve Board Building in Washington, D.C.

Photo by AgnosticPreachersKid via Wikimedia Commons · CC BY-SA 3.0

The Federal Open Market Committee voted unanimously on Wednesday to raise the federal funds rate by a quarter point, to a target range of 3.75% to 4%. It is the first increase since 2023 and the first under Kevin Warsh, who took over the central bank on May 22 after being nominated by President Trump and confirmed by the Senate. All 12 voting members backed the move.

Warsh was blunt about the reasoning. Inflation has run above the Fed's 2% target for more than five years, and he said the committee's focus is now squarely on price stability. The Fed's statement said the hike would support a timelier return to 2%, and its new projections showed 16 of 18 policymakers expect at least one more quarter-point hike by year's end. Warsh, notably, declined to submit his own projection, saying he would not prejudge future decisions.

The backdrop is an economy that is simultaneously strengthening and getting squeezed. Warsh pointed to improving hiring, private sector earnings, and business investment, and the committee now sees unemployment holding at 4.1%. But the Iran war has disrupted oil flows through the Strait of Hormuz, keeping crude above $100 a barrel and gasoline expensive, which is feeding the very inflation the Fed is trying to kill. Asked about oil, Warsh said the Fed cannot fix any single price but will prevent shocks from rippling into broader inflation.

Markets did not take it calmly. Stocks initially rose on the widely expected announcement, then reversed hard during Warsh's press conference as traders read him as hawkish. The Dow fell about 600 points, more than 1.2%, the S&P 500 slipped 0.4%, and the 10-year Treasury yield pushed above 5%, territory not seen in years. Traders now put roughly even odds on a second hike in October.

Then there is the politics. Trump, who has spent more than a year demanding lower rates and once threatened to cut off trade with deficit partners unless the Fed cut, posted on Truth Social within hours that rates should be 1% or less and demanded the Fed lower them fast. Speaking to reporters later, he said he told Warsh beforehand that he might as well vote with the board, called the FOMC a bunch of politicians, and said he still has confidence in his pick. A White House official called the hike a rather unfortunate decision.

The irony is hard to miss. Warsh was chosen in part because he had publicly echoed Trump's case for lower rates last year. His first signature move as chair was a unanimous hike and a public refusal to discuss any conversations with the president. For households, the practical effect, per CNBC's consumer reporting, is higher credit card APRs within a couple of billing cycles, pricier mortgages and auto loans over time, and better yields on savings accounts and CDs.

Free Game Takeaway:Central bank independence is not a slogan, it is a stress test, and yesterday the Fed passed one. A chair appointed by a president demanding 1% rates just delivered a unanimous hike because the inflation data left no honest alternative. Watch two things from here: the October 28 meeting, where traders now see a coin flip on a second hike, and the 10-year Treasury above 5%, because long-term borrowing costs are what actually hit mortgages, car loans, and small business credit. If you carry a variable-rate balance, assume it gets more expensive this quarter and act accordingly.

Read the lead source report

HEADLINES

Markets Rundown

The New York Stock Exchange building on Broad Street in Manhattan

Photo by Robert Ashworth via Wikimedia Commons · CC BY 2.0

Market Update

The Dow Jones Industrial Average fell about 600 points, or more than 1.2%, on Wednesday after the Fed's rate hike and Warsh's hawkish press conference, while the S&P 500 lost 0.4% and the Nasdaq finished just below flat.
The 10-year Treasury yield pushed above 5% after the Fed decision, with long-end yields climbing as traders priced in a longer fight against inflation.
Bitcoin dropped below $76,000 after the Senate failed to advance the Clarity Act, with crypto and crypto-linked stocks selling off into the Fed decision.

Economic Data

August retail sales rose 1.2%, well above expectations, a sign consumers kept spending right up to the eve of the Fed's rate hike.
The Fed's new projections show 16 of 18 policymakers expect at least one more quarter-point hike by the end of 2026, with policy seen around 4.1% through 2026-27 and inflation not returning to 2% until 2029.
FOMC members now see unemployment holding steady at 4.1%, an improvement from the prior 4.3% projection, which the committee read as room to fight inflation without damaging the job market.

Geopolitics and Oil

Brent crude traded near $101.83 a barrel and WTI near $99.38 on Thursday morning, still elevated as the Iran war keeps pressure on supply routes.
Oil flows through the Strait of Hormuz remain far below pre-war levels after the biggest spike in tanker attacks since the conflict began, with both benchmarks topping $100 earlier this month.
Warsh told reporters the Fed cannot reopen the Strait of Hormuz or set any individual price, but will act to keep oil-driven price shocks from spreading into second- and third-order inflation across the economy.

Movers & Shakers

Copart shares gained after the company announced a $1.9 billion cash deal to acquire online auto auction marketplace ACV Auctions alongside its fiscal 2026 results.
Boeing is in line for a $36.2 billion order after Korean Air signed a final contract for 103 next-generation aircraft, including 777-9s, 787-10s, 737-10s and 777-8F freighters, with Korean trade data estimating 135,000 US jobs tied to the purchase.
The Dow briefly fell more than 700 points, about 1.6%, at its session low as Warsh's press conference convinced traders the Fed is staying hawkish on inflation.

Prediction Markets

Fed funds futures tracked by CME FedWatch moved to a 50.9% chance of a second quarter-point hike in October, up from 43.5% a day earlier and just 17.6% a week ago, according to Charles Schwab's Liz Ann Sonders.
Heading into the meeting, Kalshi priced a 58% chance of the September hike and, more importantly, a base case of two hikes by December, with only 16% odds the Fed sits still through year-end.
On Kalshi's September contract, the market had leaned toward a hike resolving at the September 16 meeting, and attention has already shifted to October and December pricing.

Private Dealmaking

Korean Air finalized a package worth roughly $44.8 billion with US partners, combining the $36.2 billion Boeing aircraft order with about $8.6 billion in GE Aerospace and CFM International engine and maintenance contracts, backed by 700 billion won in support from the Korea Export-Import Bank.
Copart agreed to acquire ACV Auctions for $1.9 billion in cash, a bet on consolidating the digital wholesale vehicle auction business.

BOOK OF THE DAY

The Lords of Easy Money: How the Federal Reserve Broke the American Economy

Description:
With the Fed back at the center of the news, this is the clearest reported account of how the central bank actually works and how its choices since the 2008 crisis reshaped American wealth. Leonard follows Thomas Hoenig, the lone Fed dissenter who warned that years of near-zero rates would inflate asset bubbles and widen inequality, and traces what happened when nobody listened. It reads like a drama, not a textbook, and it will change how you hear phrases like accommodation and forward guidance the next time a chair takes the podium.

Author: Christopher Leonard

Book Length: 384 pages

Release Date: January 11, 2022

Ideal For:
Readers who want to understand why Fed decisions move their mortgage, their rent, and their retirement account, and anyone trying to make sense of the Warsh era before it unfolds.

The Fed's power lies in how quietly it redistributes money: easy policy rewards asset holders first and wage earners last, which is why a single quarter-point decision can matter more to household wealth than a year of political debate.

DAILY ACUMEN

The Time Inconsistency Problem: Why Smart People Tie Their Own Hands

In 1977, economists Finn Kydland and Edward Prescott described a trap that now carries their names: the time inconsistency problem. A plan that looks optimal today becomes tempting to abandon tomorrow, and everyone around you knows it. A government promises not to bail out failing banks, until one is actually failing. A central bank promises 2% inflation, until an election year arrives and cheap money looks appealing. Because bystanders can predict the flip, they stop believing the promise, and the promise loses its power.

The insight, which won the 2004 Nobel Prize in economics, is that credibility is an asset you build by making future defection costly or impossible. Ulysses tied himself to the mast before the sirens sang. Cortes scuttled his ships. Central banks publish targets and hold press conferences precisely so that breaking their word carries reputational pain. When Kevin Warsh declined to preview future decisions this week and said only that he had committed to a discipline, he was performing exactly this move: binding himself publicly so markets take his inflation pledge seriously.

You can use the same machinery in your own life. Willpower is a forecast, not a mechanism, so replace promises with pre-commitments: automatic transfers that move savings before you can spend them, deadlines announced to people whose opinion you fear losing, subscriptions canceled before the renewal date instead of after. The general rule is simple. Do not trust your future self to make the hard choice in the moment. Make the hard choice now, while it is cheap, and engineer the situation so your future self has no choice left to make.

ENLIGHTENMENT

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🆓 Fed Hikes Rates