TMGM Daily Market Breakfast: 17 September 2026

Morning Snapshot

• The Federal Reserve unanimously raised the federal funds target range by 25 basis points to 3.75%-4.00%, its first increase since 2023, and signalled that further tightening is likely.
• The Fed’s updated projections showed a median policy rate of 4.125% at the end of 2026 and 2027, with 16 of 18 policymakers expecting at least one more rate increase this year.
• Fed Chair Kevin Warsh said inflation trends were not passing the test and described the move as removing a dose of accommodation, reinforcing the central bank’s hawkish message.
• U.S. retail sales rose 1.2% month on month in August to $773.9 billion, reversing July’s 0.5% decline and topping expectations for a 0.8% increase.
• The Bank of England left rates unchanged at 3.75% in a 6-3 vote, prompting broad weakness in sterling across major crosses.
• The Japanese Yen firmed ahead of the Bank of Japan decision as markets priced a quarter-point increase to 1.25%, while Japanese Finance Minister Satsuki Katayama said debt issuance would be kept at a level that can maintain market credibility.
• WTI crude retreated below $100 and traded around the $96-$97 area as Saudi Arabia worked to restore flows through its damaged East-West pipeline and expand alternative export routes.
• U.S. Treasury yields remained elevated after the Fed decision, with the 10-year yield near 5%, while the dollar held gains and EUR/USD fell below 1.15.
• Gold fell to a one-month low near $4,235 after the Fed’s hawkish decision before rebounding toward $4,332 as the dollar and yields eased from their highs.
• Reuters reported that President Donald Trump is expected to meet Gulf leaders next Tuesday on the sidelines of the UN General Assembly to discuss next steps in the Iran war.

Market Developments

Rates & Foreign Exchange

U.S. rates rose after the Fed decision, with the 10-year Treasury yield near 5%, 2-year USD swap rates up 10 basis points and 10-year USD swap rates up 6 basis points, while the U.S. Dollar Index held above 100 and EUR/USD dropped below 1.15.

Equities

U.S. equity futures moved higher in European trading, with Dow Jones futures up 0.82% to around 51,930, S&P 500 futures up 0.82% to about 7,620 and Nasdaq 100 futures up 0.98% to near 29,250, while Asian stocks edged higher as investors digested the Fed’s hawkish tilt.

Commodities & Crypto

WTI crude traded around $96.60-$97.50 after falling for a second straight day from four-month highs above $102 earlier in the week, spot gold slid to $4,235 before recovering toward $4,332, silver traded around $62.68 down 1.56% on the day, and Bitcoin held above $76,000 after the FOMC decision.

Macroeconomics & Central Banks

Federal Reserve Delivers First Rate Increase Since 2023 and Signals More Tightening

The Federal Reserve unanimously raised the federal funds target range by 25 basis points to 3.75%-4.00%, marking its first increase since 2023 and its first policy move since the cut in December 2025. The policy statement said economic activity is expanding at a solid pace, domestic spending is resilient, unemployment has changed little and inflation remains elevated.

The updated Summary of Economic Projections reinforced a hawkish policy path. The median federal funds projection for end-2026 rose to 4.125% from 3.75% in June, while the end-2027 projection increased to 4.125% from 3.625% and the end-2028 projection rose to 3.875% from 3.375%. Sixteen of 18 officials projected at least one more increase this year, with 12 expecting one additional quarter-point move, four expecting two more hikes and two expecting no further change.

The Fed also revised its macroeconomic projections. Policymakers now see 2026 PCE inflation at 3.7% versus 3.6% in June and core PCE inflation at 3.4% versus 3.3%. The unemployment rate projection for end-2026 was lowered to 4.1% from 4.3%, while 2026 GDP growth was raised to 2.3% from 2.2%.

Chair Kevin Warsh struck a firm tone after the decision, saying inflation trends were not passing the test and describing the move as removing a dose of accommodation. He said inflation was too high and indicated that the view that policy remained accommodative was widely shared across the Committee. Fed funds futures later priced a 51% probability of another 25 basis point hike in October and a total of 33 basis points of tightening by year-end.

U.S. Retail Sales Rebound Sharply in August

U.S. retail sales rose 1.2% month on month in August to $773.9 billion, according to the U.S. Census Bureau. The gain reversed July’s 0.5% contraction and exceeded expectations for a 0.8% increase.

On an annual basis, retail sales were up 6.0%. The stronger reading added to evidence of resilient domestic demand at a time when the Federal Reserve said spending remained firm in its policy statement.

Bank of England Holds at 3.75% in 6-3 Vote

The Bank of England left its policy rate unchanged at 3.75%, a decision that was widely anticipated but still weighed on sterling after the announcement. The vote split was 6-3, matching expectations in pre-decision coverage that the Monetary Policy Committee remained divided over whether to tighten further.

The hold came as UK inflation concerns remained tied closely to energy costs. Pre-decision reporting highlighted that August CPI had been confirmed at 3.1%, above the Bank’s earlier 2.8% expectation, while surging natural gas prices and a higher OFGEM utility price cap in January were seen as factors that could lift headline CPI above 4.0%.

Sterling weakened broadly after the decision. GBP/USD slipped to around 1.3375, GBP/JPY traded near 208.23 and was down 0.40% on the day, and the euro strengthened against the pound as markets absorbed the BoE’s decision to stay on hold while several other major central banks have tightened policy this month.

Bank of Japan Decision Looms as Markets Price a Move to 1.25%

Attention in Asia turned to the Bank of Japan ahead of its policy decision, with markets pricing a quarter-point increase to 1.25%. Several reports said the move was largely priced in, while the yen strengthened in Thursday trading as investors positioned for the outcome.

USD/JPY traded around 155.75 to 155.80 in European and Asian trading after giving back part of the previous session’s advance, although earlier post-Fed trading had pushed the pair into the 155.50-156.50 area. The yen also outperformed sterling ahead of the BoJ decision.

Japanese Finance Minister Satsuki Katayama said the government would review budget requests and control debt issuance at a level that can gain market credibility. Katayama also said the government expects the BoJ to coordinate closely with the government and conduct appropriate monetary policy to achieve stable and sustainable 2% inflation.

ECB Officials Keep Door Open to Further Moves

European Central Bank Governing Council member Gabriel Makhlouf said the ECB cannot rule out anything at future meetings, keeping the focus on how far the central bank may need to go after last week’s quarter-point increase.

Separate reporting on euro-area rates expectations showed money markets had moved to price more than four additional ECB hikes beyond the two already delivered, although policymakers were described as wary of markets moving faster than the central bank’s own reaction function. Reports also cited indications that any next move was more likely in December than October.

Energy & Geopolitics

WTI Pulls Back as Saudi Arabia Restores Export Routes

WTI crude fell for a second straight day and traded around $96.60 to $97.50, down from four-month highs above $102 reached earlier in the week. The retreat came as Saudi Arabia stepped up efforts to restore flows through its damaged East-West pipeline and expand alternative export arrangements.

Saudi Aramco was reported to be working to restore about half the capacity of the damaged pipeline within days. The company was also increasing crude shipments to Asian refiners through ship-to-ship transfers near Oman’s Sohar port, providing an alternative route for exports.

Even with the pullback, oil markets remained sensitive to regional security risks. Shipping through the Strait of Hormuz was described as heavily restricted, while security concerns around the Red Sea and the Bab el-Mandeb Strait continued to keep a geopolitical premium embedded in prices.

Trump Expected to Hold Iran War Talks With Gulf Leaders at UNGA

President Donald Trump is expected to meet Gulf leaders next Tuesday on the sidelines of the United Nations General Assembly in New York to discuss next steps in the Iran war, Reuters reported.

The planned meeting keeps geopolitical risk in focus for energy markets and broader investor sentiment as the conflict continues to affect shipping routes and supply concerns across the Middle East.

Market Impact

Dollar Holds Gains and Treasury Yields Stay Elevated After Fed Decision

The U.S. dollar remained firm after the Fed’s hawkish decision, with the U.S. Dollar Index holding above 100.00 and extending a six-session winning streak in Asian trading. EUR/USD fell below 1.15 and traded around 1.1460, while USD/CAD held just below 1.4000 and the Swiss franc consolidated losses at 16-month lows against the dollar after dropping more than 2% over the previous five trading days.

Rates also stayed elevated. The 10-year Treasury yield was near 5%, while reporting on swap markets showed 2-year USD swap rates up 10 basis points and 10-year USD swap rates up 6 basis points after the Fed decision. The move reflected a repricing toward a higher-for-longer U.S. policy path.

Gold Rebounds After Sliding to One-Month Low

Gold came under heavy pressure after the Fed decision, falling from an intraday high of $4,366 to a one-month low of $4,235 before stabilising. Spot gold was later quoted around $4,250 in late Wednesday trade and around $4,332 on Thursday as the dollar and Treasury yields eased from their immediate post-Fed highs.

Silver also weakened after the Fed announcement, trading around $62.68 and down 1.56% on the day. The moves reflected the pressure on non-yielding metals from a stronger dollar and higher U.S. yields following the Fed’s hawkish guidance.

Equity Futures Rise While Bitcoin Holds Above $76,000

U.S. equity futures moved higher in European trading despite the Fed’s hawkish message. Dow Jones futures rose 0.82% to near 51,930, S&P 500 futures gained 0.82% to around 7,620 and Nasdaq 100 futures advanced 0.98% to near 29,250. Asian stocks also edged higher, though gains were capped by elevated yields and geopolitical tensions.

In digital assets, Bitcoin traded above $76,000 after the FOMC decision. The move was described as muted, with markets having largely priced in the quarter-point increase.

Upcoming Key Events

• Bank of Japan Policy Decision — overnight: The Bank of Japan is due to decide on its policy rate, with markets pricing a quarter-point increase to 1.25% and August CPI data also in focus ahead of the meeting.
• U.S.-Gulf Leaders Meeting on Iran War — next Tuesday: President Donald Trump is expected to meet Gulf leaders on the sidelines of the UN General Assembly in New York to discuss next steps in the Iran war.