Fed Keeps the Door Open for More Rate Hikes as Schmid Warns There's 'Work to Do'

 

Fed Keeps the Door Open for More Rate Hikes as Schmid Warns There's 'Work to Do'

## The Fed Just Raised Rates for the First Time in Three Years — And One Top Official Is Already Saying: Don't Get Comfortable

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### The Moment the Punch Bowl Got Pulled Away

Let me tell you about a Friday afternoon in Vail, Colorado, that should have every American with a credit card, a mortgage, or a retirement account paying very close attention.

Kansas City Fed President Jeffrey Schmid stood up in front of the Independent Community Bankers of Colorado Annual Convention and delivered a message that was as blunt as it was uncomfortable. He said he supported the Fed's decision earlier that week to raise interest rates for the first time in over three years. He called it "a step in the right direction." And then he dropped the hammer: **"We have a lot of work to do on inflation"** .

Translation? The rate hike you just saw? That wasn't the end. That was the beginning.

For the past three years, Americans have gotten used to a world where the Fed was either holding rates steady or cutting them. Cheap money was the expectation. Mortgage rates were supposed to come down. Credit card debt was supposed to get easier to manage. That era is officially over.

On Wednesday, September 16, 2026, the Federal Open Market Committee voted **unanimously — 12 to 0 — to raise the federal funds rate by 25 basis points to a target range of 3.75% to 4.00%** . It was the first rate hike since July 2023. And according to the Fed's own projections, it won't be the last.

The market reaction was swift and brutal. The Dow Jones Industrial Average fell **1.21%, or more than 630 points**. The S&P 500 dropped 0.45%. The Nasdaq was basically flat, but that's cold comfort when you're watching your portfolio bleed .

But here's what matters more than the market's tantrum: **the Fed's own "dot plot" shows that 16 out of 18 policymakers expect at least one more hike before the end of 2026** . Four of them expect two more hikes.

Let that sink in. The Fed isn't done. Not even close.

So let's talk about what's happening, why it's happening, and — most importantly — what it means for your money.

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## What Exactly Did the Fed Do?

### The Decision Itself

The FOMC raised the federal funds rate to **3.75%–4.00%**, a 25-basis-point increase from the 3.50%–3.75% range that had been in place since earlier in the year . The vote was unanimous, which is significant. It means there was no dissent. No hesitation. The entire committee is on board with the direction.

The statement described economic activity as expanding at a **"solid pace"** despite "elevated uncertainty" from geopolitical developments — a polite way of referring to the conflict in the Middle East. Job gains were said to have "kept pace with the workforce." Consumer spending was called **"resilient."** Productivity growth was called **"strong."** Capital investment was called **"robust"** .

In other words: the economy isn't broken. It's actually doing pretty well. And that's exactly why the Fed feels comfortable raising rates.

### The Inflation Problem

Here's the thing about inflation. It's still too high. The Fed's preferred measure, Core PCE, is running at **3.3% year-over-year**, well above the Fed's 2% target. The Fed's updated forecast for 2026 Core PCE inflation was raised to **3.4%** .

And Schmid made it clear that inflation isn't just about oil prices. "A broad range of goods and services are showing price growth inconsistent with our price stability target," he said . He pointed out that inflation has run above the Fed's 2% target for **more than five years**, and the most recent readings suggest the pace is still trending above 3% .

This is important. A lot of people have been hoping that the oil price spike from the Middle East conflict would fade, and inflation would come down on its own. Schmid is saying: don't count on it. The inflation problem is deeper than energy. It's embedded in the broader economy.

### The Dot Plot: A Hawkish Shift

The Fed's "dot plot" — the chart that shows where each FOMC member expects rates to go — told a hawkish story. The median participant now expects the fed funds rate to end 2026 at **4.1%**, up from previous projections . Sixteen of eighteen participants expect at least one additional hike this year. Four expect two.

And here's something you need to understand: **Fed Chair Kevin Warsh didn't submit a dot plot or any economic projections for the second consecutive meeting** . That's unusual. It's a signal that Warsh wants to keep the market guessing — and that he's not afraid to be more aggressive than his predecessors.

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## Meet Jeffrey Schmid: The Man Behind the Warning

### Who Is He?

Jeffrey Schmid is the President of the Federal Reserve Bank of Kansas City. He's not a voting member on the FOMC this year, but he still attends meetings and expresses his views. And he's been one of the most consistently hawkish voices on the committee.

Schmid doesn't mince words. Back in August, he told Bloomberg Television at Jackson Hole: **"For me I think it might be accommodative on the short end. So we've got work to do"** . He rejected the idea that current rates are restraining the economy. He said inflation has been "stubborn" and "sticky," and that "we've got to continue to find ways to break through" .

He even said he doesn't know "what we're restricting currently with the rate policy that we're at today" .

That's about as hawkish as it gets. Schmid is essentially saying: rates aren't high enough. We need to go higher. And he's not alone.

### Why His Words Matter

Schmid's comments are significant because they represent a broader shift in the Fed's thinking. For years, the debate was about when to cut rates. Now the debate is about **how many more hikes are needed**.

This isn't just about Schmid. It's about the entire committee. The unanimous vote to hike, the hawkish dot plot, and the absence of any dovish dissent all point in the same direction: the Fed is serious about fighting inflation, and it's willing to risk economic pain to get there.

Schmid also voiced support for an idea that Chair Warsh raised in July: reducing the number of FOMC meetings per year from eight to six . That's a structural change that would make the Fed less reactive to short-term data and more focused on long-term goals. It's another sign that the Fed is shifting toward a more disciplined, less market-friendly approach.

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## What This Means for Everyday Americans

Okay, let's bring this home. You're not a bond trader. You're not a Fed watcher. You're an American who has a job, maybe a family, probably some debt, and definitely some bills. What does a Fed rate hike actually mean for you?

### Your Mortgage Just Got More Expensive

The 30-year fixed mortgage rate was already hovering around **6.95%** before the Fed's decision. According to Freddie Mac, it's now at its highest level since January 2025 . The National Association of Realtors said mortgage rates rose from 6% in late February to **7% this week**, and warned that 7% could be "the new normal" .

If you were waiting for mortgage rates to drop before buying a home or refinancing, you might be waiting a long time. The Fed's signal that more hikes are coming means mortgage rates are more likely to rise than fall in the near term.

### Your Credit Card Bill Is Going Up

Credit card rates are tied to the prime rate, which moves with the fed funds rate. When the Fed hikes, your credit card APR goes up. According to one analysis, the Fed's hike will add **$2 billion in additional credit card interest payments** for American households .

If you're carrying a balance, this hurts. If you're not, it's a reminder that paying down debt is more important than ever.

### Your Savings Account Is Still Your Friend

Here's the one silver lining. High-yield savings accounts and CDs are paying attractive rates right now. With the Fed signaling more hikes to come, those yields aren't going anywhere. If you've got cash sitting on the sidelines, now is still a good time to lock in a decent rate.

### Your 401(k) Is Taking a Hit — But Don't Panic

The Dow fell more than 630 points after the Fed's decision . But one day doesn't define a market cycle. The S&P 500 is still resilient, and strong earnings are helping equities absorb higher rates for now . If you're a long-term investor, staying the course is usually the right move. But expect more volatility ahead.

### Your Job Could Be at Risk — Eventually

Higher rates slow down the economy. They make borrowing more expensive for businesses, which can lead to hiring freezes, layoffs, and slower growth. The Fed is betting that the economy is strong enough to handle higher rates without tipping into recession. But that's a bet, not a guarantee.

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## The Bigger Picture: Why the Fed Is Doing This

### The Inflation Fight Isn't Over

Let's be clear about something: the Fed's job is to keep prices stable. That's half of its dual mandate (the other half is maximizing employment). And by the Fed's own measures, it's failing at the price stability part.

Inflation has been above 2% for more than five years. Core PCE is at 3.3%. The Fed's forecast for 2026 inflation was raised to 3.4%. And Schmid is warning that the problem is broader than energy .

The Fed has to do something. If it doesn't, it risks losing credibility. And if markets and consumers stop believing the Fed will fight inflation, inflation expectations can become unanchored — which makes the problem even worse.

### The Economy Can Handle It

The good news is that the economy appears strong enough to handle higher rates. GDP growth forecasts were raised to **2.3% for 2026 and 2.4% for 2027** . The unemployment rate is expected to hold steady at **4.1%** . Consumer spending is resilient. Business investment is robust.

No participants viewed growth risks as skewed to the downside, with risks now broadly balanced . That's a significant shift from earlier in the year, when recession fears were more pronounced.

### The Political Dimension

There's also a political dimension to all of this. President Trump has long pushed for lower rates. He appointed Kevin Warsh as Fed Chair specifically because he wanted someone who would cut rates. But Warsh has turned out to be more hawkish than expected. In June, he put the blame for high rates squarely on President Trump's own policies .

The Fed is asserting its independence. And that's a good thing. Central banks that bend to political pressure tend to make inflation worse, not better.

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## What the Experts Are Saying

Let's tap into what the smart money is thinking.

**J.P. Morgan Asset Management** noted that the Fed's September statement was "mostly unchanged" from June, but the inflation language shifted notably. The reference to "supply shocks from energy" was removed and replaced with language emphasizing that "today's policy action will support a timelier return" to the 2% goal . That's a signal that the Fed is taking ownership of the inflation problem, rather than blaming it on external factors.

**Fidelity International** said the Fed's 25-basis-point hike was widely expected, but the more important message was the signal that more hikes are coming. Fidelity expects the Fed to increase rates once more in 2026, with no cuts in 2027 .

**Bank of America** overhauled its Fed outlook earlier this year, shifting from a forecast of a rate freeze to **three hikes in 2026** . That's a dramatic revision, and it reflects how much the inflation picture has changed.

**State Street** noted that the median dot now implies **one rate cut in 2027 and one more in 2028**, with the fed funds rate ending 2026 at 4.1% . That's a "higher for longer" scenario that markets are still adjusting to.

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## What Happens Next? Key Dates and Events to Watch

The Fed's next meeting is in **late October/early November 2026**. Between now and then, here's what to watch:

**The October FOMC Meeting**: Schmid rejected the idea that the October 28 meeting is off the table due to the midterm election . That means another hike is possible — maybe even likely — before Americans go to the polls.

**Inflation Data**: The next CPI and PCE reports will be critical. If inflation shows signs of cooling, the Fed might pause. If it doesn't, expect another hike.

**Oil Prices**: The Middle East conflict remains a wildcard. If oil prices stay elevated, inflation pressure will persist.

**The Labor Market**: Job growth has been solid, but any signs of weakness could give the Fed pause.

**The Midterm Elections**: Crypto policy, inflation, and the economy are all on the ballot. The outcome could shape the Fed's path in 2027.

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## Frequently Asked Questions (FAQs)

### Q1: Did the Fed raise rates today?

Yes. The FOMC voted unanimously to raise the federal funds rate by 25 basis points to a target range of **3.75%–4.00%** . It was the first rate hike since July 2023.

### Q2: Why did the Fed raise rates?

The Fed raised rates because inflation remains too high. Core PCE inflation is running at 3.3%, well above the Fed's 2% target. Fed officials, including Jeffrey Schmid, have warned that inflation is broad-based and not just driven by energy prices .

### Q3: Will the Fed raise rates again?

The Fed's dot plot shows that **16 out of 18 policymakers expect at least one more hike before the end of 2026**. Four expect two more hikes . Schmid has said the Fed has "work to do" on inflation .

### Q4: What does this mean for mortgage rates?

Mortgage rates are already near 7% and are likely to stay elevated or rise further. The 30-year fixed rate was 6.95% as of September 17, up from 6.76% the previous week . The National Association of Realtors expects 7% to be the "new normal" .

### Q5: How does this affect my credit card debt?

Credit card rates are tied to the prime rate, which moves with the fed funds rate. The Fed's hike will increase credit card interest costs. One analysis estimates **$2 billion in additional credit card interest payments** for American households .

### Q6: Should I lock in a CD or high-yield savings rate?

With the Fed signaling more hikes, savings rates are likely to stay elevated or rise further. Locking in a competitive rate now could be a smart move.

### Q7: What does this mean for the stock market?

The Dow fell more than 630 points after the Fed's decision . Higher rates pressure growth stocks and make borrowing more expensive for companies. Expect more volatility ahead, but long-term investors should stay the course.

### Q8: Is the Fed trying to cause a recession?

No. The Fed is trying to bring inflation down to 2% without causing a recession. That's a delicate balancing act. So far, the economy has held up well, but the risk of a slowdown increases with each hike.

### Q9: What is the "dot plot"?

The dot plot is a chart that shows where each FOMC member expects interest rates to be in the future. It's not a promise, but it gives investors insight into the Fed's thinking. The September dot plot showed a hawkish shift, with most members expecting more hikes .

### Q10: Who is Jeffrey Schmid?

Jeffrey Schmid is the President of the Federal Reserve Bank of Kansas City. He's a hawkish voice on the FOMC and has consistently warned that inflation is too high and rates aren't restrictive enough .

### Q11: Why isn't Schmid a voting member?

The FOMC rotates voting members among the regional Fed presidents. Schmid doesn't vote this year, but he still attends meetings and expresses his views .

### Q12: What's the difference between the Fed's rate and mortgage rates?

The fed funds rate is the rate banks charge each other for overnight loans. Mortgage rates are tied to long-term Treasury yields, which are influenced by the fed funds rate but also by inflation expectations, economic growth, and global demand for U.S. debt.

### Q13: Will the Fed cut rates in 2027?

The Fed's dot plot shows no rate cuts in 2027, with the median participant expecting the fed funds rate to remain at 4.1% . Rate cuts aren't expected until 2028.

### Q14: What should I do with my investments?

That depends on your financial situation and risk tolerance. Consider focusing on quality companies with strong balance sheets, adding bonds for income, and keeping some cash on hand for opportunities. Consult a financial advisor for personalized guidance.

### Q15: How does this affect the U.S. dollar?

A hawkish Fed typically strengthens the dollar, as higher rates attract foreign capital. The dollar rose after the Fed's decision .

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## Conclusion: The Era of Cheap Money Is Over

Let's be honest about what's happening here. The Fed just told the American people that the era of cheap money is over. Rates are going up. They're probably going up again. And they're going to stay high for a while.

This is a significant shift. For three years, Americans have been waiting for relief. Waiting for mortgage rates to come down. Waiting for credit card bills to get easier. Waiting for the Fed to start cutting again.

That wait is over. And the message is clear: **relief isn't coming anytime soon**.

But here's the thing. The Fed isn't raising rates because it wants to punish you. It's raising rates because inflation is a tax on everyone — especially the poorest Americans. High inflation erodes your paycheck, your savings, and your quality of life. The Fed's job is to stop it, even if that means some short-term pain.

Jeffrey Schmid put it simply: "We have a lot of work to do" . He's right. And the Fed is going to keep working until the job is done.

For investors, the message is clear: stay diversified, stay disciplined, and don't fight the Fed. For homeowners and borrowers, the message is: plan for higher costs, and don't assume rates will fall anytime soon. For everyone else, the message is: pay attention. The decisions being made in Washington right now will shape your financial life for years to come.

The punch bowl has been pulled away. It's time to get used to it.

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## Disclaimer

This article is for informational and educational purposes only and does not constitute financial, investment, or legal advice. The views expressed are those of the author and do not necessarily reflect the official policy or position of any financial institution. Investing involves risk, including the possible loss of principal. Past performance does not guarantee future results. Readers should consult with a qualified financial advisor before making any investment decisions. The author is not responsible for any financial losses incurred as a result of actions taken based on the information provided in this article. All data and figures cited are sourced from publicly available reports and are subject to change.