As part of our initiative to bring timely market information to California public agencies, CalTRUST Chief Executive Officer Laura Labanieh Kitson had a brief Q&A with State Street Investment Management’s Vice President, Portfolio Strategist Will Goldthwait to reflect on this week’s Federal Reserve meeting:
What in Tarnation Just Happened at the Fed?
Laura: Why did the Fed raise rates today?
Will: The Fed did exactly what markets expected and raised the federal funds rate by 25 basis points to 3.75%-4.00%. The decision was unanimous, and Chair Kevin Warsh made it clear that inflation remains too high and is not moving back to 2% quickly enough. In Fed-speak, this was a recalibration. In country music terms, the Fed looked at inflation and, as Dolly might say, begged, “Jolene, please stop stealing my 2% inflation target.”
Laura: What was the key message from Chair Warsh?
Will: Warsh’s message was remarkably simple: price stability comes first. He repeatedly emphasized that inflation has been too high for too long and argued that stable prices are the foundation of sustainable economic growth. While he acknowledged that growth, productivity, and labor markets remain healthy, he made it clear that the Fed is not yet convinced inflation is headed back to target fast enough. Investors hoping for Willie Nelson’s On the Road Again toward rate cuts instead got Johnny Cash’s I Walk the Line.
Laura: What did the SEP tell us?
Will: The SEP may have been more important than the rate hike itself. Policymakers continue to anticipate the possibility of additional tightening, with the median participant expecting one more increase before year-end. More importantly, the projections reinforced the idea that rates may remain elevated for longer than investors had hoped, supporting the market’s “higher for longer” narrative. Investors were looking for George Strait’s Check Yes or No on future rate cuts, but the Fed’s answer was closer to “ask me again later.”
Laura: Is another rate hike really coming?
Will: Probably, but it is far from guaranteed. Policymakers clearly want to preserve the option to tighten further if inflation remains stubborn, but future decisions will depend on incoming economic data. If inflation cools, energy prices retreat, or labor markets soften, today’s move could ultimately be the last hike of the cycle. For now, however, the Fed is channeling Kenny Rogers’ The Gambler and refusing to show its cards.
Laura: Did the market get the message?
Will: Mostly. The rate hike itself was fully priced in, but investors focused on the Fed’s continued emphasis on inflation and its unwillingness to waiver on that. As Dolly once said, if you want the rainbow, you’ve got to put up with the rain. Apparently, if you want 2% inflation, you’ve got to put up with 4% policy rates.
Laura: What does this mean for cash investors?
Will: For cash investors, today’s decision is mostly good news. Higher policy rates continue to support money market fund yields and reinforce the appeal of short-duration strategies. The bigger story is that the Fed appears willing to keep rates restrictive for a while, which could extend the period of attractive cash yields. While equity investors are searching for the next chart-topping hit, cash investors are quietly humming Dolly’s 9 to 5 and collecting income.
Bottom Line
Today’s Fed meeting felt less like a surprise and more like the ending everyone knew was coming. The Fed hiked, Warsh doubled down on no forward guidance, the inflation fight, and the SEP continued to signal that policymakers are not finished talking tough. The economy remains resilient, and inflation remains too high for the Fed’s liking. If you want the rainbow, you’ve got to put up with the rain.
Source: Fed, Bloomberg, SSIM, WSJ, Reuters, Economist, as of Sept 16, 2026