Investment Insights — Week of September 21, 2026

Hi, I'm Tim Gereg, Head of Capital Solutions at Texas Capital. 

The day we were all waiting for finally came. Last Wednesday, as expected, the FOMC raised the Fed funds target range by 25 basis points to 3.75 to 4%. The decision was unanimous, and it was the first hike since July of 2023. Heading into the meeting, the market had priced in over a 90% chance of a hike, and the 10-year touched 5.04%, its highest level since 2007. The FOMC statement was concise. The economy is doing well, and this hike is intended to "support a timely return to the committee's 2% goal." Regardless of whether one believes the hike was actually needed at this juncture, and there's plenty of healthy debate there, I think this hike did a lot to enhance the Fed's credibility. Credibility in the sense that one, they will actually deliver on the hawkish rhetoric over the past five months. And two, for the Fed retaining its independence, not being politically motivated. 

We also received the Fed's quarterly summary of economic projections. Sixteen of the 18 participants penciled in either one or two additional hikes before year-end, with only two participants that saw no more hikes this year. That puts the median forecast at 4 to 4.25% by December. Contrast that with June, when the committee was roughly split down the middle and only six of the 18 saw the policy rate above 4% by year-end. Also last week, 14 of the 18 participants penciled in either a hold or a hike through 2027, so only four saw any cuts. 

Growth was revised up, unemployment revised down and the path back to 2% inflation was pushed out to 2029. The longer-run neutral rate ticked up from just over 3% to 3.25. One of the most hawkish lines from the press conference, in my view, was when Chairman Warsh stated that the 25 basis point hike removed a dose of accommodation, which he repeated twice during the Q&A. This tells me that he and the committee still do not view financial conditions as restrictive, even after the single 25 basis point hike.

Economic data last week told a similar story. Retail sales jumped 1.2% in August, well above expectations, and jobless claims fell back below 200,000. Oil was the other big driver for the rates last week. Brent hit a four-month high of nearly $110 early the week following a drone attack that shut down Saudi Arabia's East-West pipeline, a 7 million barrel-per-day route to the Red Sea that bypasses the Strait of Hormuz. Oil finished the week lower, and WTI is back below $95 this morning. The two-year treasury finished the week up 13 basis points to 4.74%. And the 10-year ended the week up slightly, almost exactly at 5%. All in, 2s 10s flattened nearly 10 basis points over the week as the front end is repricing a sharper path of hikes and the long end found a bit more support. 

As of this morning, the market is implying an additional three hikes by July of next year. We have two more FOMC meetings to go in 2026. And keep in mind, the October meeting comes a week before the midterm elections, which, while I don't expect the Fed to be acquiescent to any political pressure, it will certainly raise some eyebrows if they hold in October and the inflation data does not cool materially. That's it for this week. Let us know how we can help.