The Fed is expected to hike with oil still above $100
Wednesday, September 16, 2026: FOMC decision at 2 p.m. ET, with fed-funds futures implying a 92.5% chance of a 25-basis-point hike; August retail sales at 8:30 a.m.
The Federal Reserve is expected to raise its target range at 2 p.m. Eastern, a quarter-point step from 3.50%–3.75% to 3.75%–4.00% and the first increase since 2023. Fed-funds futures implied a 92.5% chance of that move early Wednesday, up from 33% a month ago; 86 of 101 economists in a Reuters survey taken after Friday's inflation report reached the same conclusion. A move that thoroughly priced is not the surprise. The surprise, if there is one, sits in Chair Kevin Warsh's projections and in the press conference at 2:30 p.m.
As of 8:25 a.m. Eastern, the bid is in the broad equity funds. The oil and energy funds that led Tuesday are giving some of it back.
Energy was Tuesday's exception
Breadth was poor. Of 5,444 U.S.-listed ETFs that priced, 1,000 closed higher and 4,329 closed lower.
Energy led; nine of eleven sectors fell
- +2.2%
- +0.5%
- −0.05%
- −0.1%
- −0.3%
- −0.3%
- −0.6%
- −0.8%
- −0.9%
- −1.2%
- −1.7%
Levered long energy funds rose a median 3.8%, with all six higher.
Crude is still above $100 and the 10-year Treasury closed at 5% on the official curve, Tuesday's split still in force: energy higher, almost everything else lower. Small-cap IWM is down 3.2% over five sessions. The high-yield bond fund HYG closed lower for a seventh straight session; the investment-grade corporate bond fund LQD for a fifth. Long Treasurys TLT slipped another 0.3% and are down 1.8% over five sessions. Credit and duration have been marking the hike down in price for a week.
Credit and long Treasurys are lower into the decision
- HYG · 78.38
- LQD · 104.28
- TLT · 80.71
A 2% overnight oil decline leaves the level intact
West Texas Intermediate was at $103.87 a barrel as of 8:15 a.m. Eastern, down 1.9%. Brent was at $107.35, down 1.3%. Gold futures were at $4,384.90, up 1.2%. The dollar index was at 99.44, down 0.2%. The 10-year yield was at 4.98% as of 8:25 a.m., just under Tuesday's 5% official close.
Oil's overnight percentage is not the inflation problem. The level is. Crude is still above $100 after Tuesday's jump, with supply still tied to the war with Iran, reduced flows through the Strait of Hormuz, and last week's damage to Saudi Arabia's East-West pipeline. Energy Secretary Chris Wright called that closure a brief interruption that would last days. Andy Lipow, president of Lipow Oil Associates, said images of a damaged pumping station point to months of repairs, and Kpler, a trade-data firm, expects the line to run at about half of normal capacity for up to six weeks. U.S. crude inventories reportedly rose last week, a co-move with the overnight dip. The price itself is still the one that has been feeding inflation: consumer prices rose 3.4% over the 12 months ending August, the government reported Friday, with gasoline up 3.9% in the month and accounting for more than a third of the August increase.
Christopher Phelan, chairman of the Council of Economic Advisers, said Tuesday that a rate hike would be a mistake. USO and XLE are lower before the open by 2.0% and 1.1%, a partial giveback of Tuesday's jump.
August retail sales and the 2 p.m. decision
August retail sales are due at 8:30 a.m. Eastern, with July still the last print: $763.6 billion, down 0.6% from June and up 5.0% from a year earlier, seasonally adjusted but not for prices. Business inventories for July follow at 10 a.m. Those numbers are the last official look at demand before the statement.
A hold would reprice funds this afternoon. So would a hike paired with the Summary of Economic Projections, the quarterly rate path each official submits, that keeps further increases on the table while oil is still above $100. So would a Warsh press conference that describes today as a one-step adjustment. What is not in the price, after a week of credit and duration marking the quarter-point down, is a hold, or a hike that Warsh presents as the first of several. The Bank of Japan's two-day meeting begins Thursday, a second policy event before the week is out.
Frequently asked
Why would the Fed hike now?
Consumer prices rose 3.4% over the 12 months through August, with gasoline alone accounting for more than a third of the August increase, while crude stays above $100.
Isn't oil falling this morning?
It is down about 2% overnight, but the level is what feeds inflation and crude is still above $100 after Tuesday's jump.
What could actually move funds this afternoon?
A hold, or a hike presented as the first of several, since neither is in the price after a week of credit and duration selling.
Why is the Saudi pipeline still an issue?
The energy secretary called the closure a days-long interruption, but an oil consultant sees months of repairs and trade-data firm Kpler expects about half of normal capacity for up to six weeks.