Leadership1 publisher3 min readPublished
Fed's year-end projection makes another quarter-point hike the base case for 2026 borrowing
Fed policymakers raised rates 12-0 to 3.75%-4% on Sept. 16, and 16 of 18 projected at least one more quarter-point hike this year. Long yields have since risen more than the hike itself, so borrowers have more reason to plan around that projection than around President Trump's complaint.
The Board Room · Leadership desk
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What happened
- The 10-year Treasury yield closed at 5.29% on Sept. 30, its highest of 2026 and above the 5.26% peak set in June 2007.
- The September increase was the Fed's first rate rise in more than three years.
- On Polymarket, traders priced a 24.5% chance of another quarter-point hike at the Oct. 27-28 meeting and 74.5% on no change.
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Why it matters
- cost Borrowers refinancing at long maturities already face a bigger increase than the quarter point the Fed added, before any second hike arrives.
- decision Rate assumptions for the rest of 2026 have to choose between the committee's implied year-end range of at least 4%-4.25% and the president's view that no hike was needed.
- contradiction With the president saying inflation can pay down the debt and the Fed promising price stability, White House commentary is a weak guide to the committee's next move.
Long-term yields moved further than the Fed did. The committee added 25 basis points to its target. The 10-year Treasury yield rose 28 basis points between the Sept. 16 close and its Sept. 30 high [1], and the 30-year yield rose 29, to 5.64% [2][6]. Bitcoin.com News reported that borrowing costs have climbed as long bond yields reached levels not seen in nearly two decades [17]. On Oct. 1 the 10-year eased to 5.24% [4], two basis points below its June 2007 peak [4].
The record supports budgeting for rates that stay high and go up once more this year. It does not show a steady climb. Polymarket's October pricing and the committee's projection answer different questions. Traders see an October hike as the less likely outcome [8], while most policymakers projected at least one more quarter-point increase before the year ends [7]. Bitcoin.com News wrote that traders are less convinced the move comes this month [7]. If the committee does what it projected, the target range ends 2026 at 4%-4.25% or higher [5]. I would plan on that range and treat October as a question of timing.
The trade-off for a borrower is familiar. Fixing a rate now means paying close to the highest 10-year yields since 2007 [5]. Waiting means betting that the committee's projection for the rest of the year turns out wrong [7].
A skeptic would say a president who wants lower rates, and who chose the chair, gets them in the end. September's vote does not support that. Kevin Warsh, Trump's nominee, oversaw a unanimous decision [9][10]. When Time's interviewers raised it on Sept. 28, Trump asked, "This just happened?" and then said, "I don't think they should." [9] He said Warsh is "controlled to a certain extent by the board" [10]. "We have a very hostile board, and the board says, 'We want to hurt Trump,'" he said [11]. He also cited "great job numbers, 162,000" as proof the hike was unnecessary [12].
The two sides also disagree about inflation itself. The committee's statement read: "Inflation remains elevated. The Committee will deliver price stability." [3] Talking about the national debt, Trump said: "Certain levels of inflation will also pay off that debt very rapidly. Very rapidly." [13]
Warsh has so far signaled before acting. He flagged tighter policy at Jackson Hole in August, and by Sept. 16 the hike was largely priced in, according to Bitcoin.com News [14]. The publication offered that as the reason bitcoin rose about 13% after the decision [15]. Its reporting does not include bank loan or corporate bond rates, so it is not yet clear how much of the move has reached any given credit line.
What to watch
- The Oct. 27-28 FOMC decision, where a hike would make Polymarket's minority outcome real and pull the year-end projection forward.
- Whether the 10-year yield climbs back above the 5.26% June 2007 peak after easing to 5.24% on Oct. 1.
- Whether Trump turns his criticism from the board to Warsh himself, an outcome Polymarket priced at 7% by Oct. 31.