Sep 21, 2026 · 11 min · 6 segments
This week in the markets: investors adapt to persistent inflation as central banks (with one notable exception) tighten together. Fidelity’s Tom Stevenson reviews the stories moving markets. See…
The 25 basis point increase in rates was widely expected, but significant nonetheless.
It was the firmest evidence to date that new Fed chair Kevin Walsh is his own man, prepared to resist pressure from the White House to keep rates lower than he and his rate setting colleagues believe is necessary.
The projections for future rate hikes confirm the committee's shared view that inflation and resilient economic activity justify tighter policy.
The dot plots that track expectations among the rate-setters point to another increase this year and no cuts next year.
Having spent five years above the Fed's 2% target, that would mean a full eight years of higher inflation.
And that will continue to have an impact on the investment landscape for years to come.
geopolitical fragmentation and the need to duplicate supply chains as globalization fades, the need for greater energy security, persistent fiscal deficits as spending stays high and the ability to raise taxes is limited, not to mention the intense capital spending requirements of the AI boom.
Kevin Walsh's press conference after the rate decision was announced confirmed much of this.
He said that the Fed had removed accommodation rather than made policy restrictive.
And he said that the Fed would require clearer evidence that inflation was heading back to target.
That suggests that the markets were impressed by the show of independence from the Fed.
It seems likely that last week's hike was the first of several, perhaps a three to four rate hiking cycle.
Whether that is necessary will depend in large part on whether the AI spending boom continues.
The 25 basis point increase in rates was widely expected, but significant nonetheless.
It was the firmest evidence to date that new Fed chair Kevin Walsh is his own man, prepared to resist pressure from the White House to keep rates lower than he and his rate setting colleagues believe is necessary.
The projections for future rate hikes confirm the committee's shared view that inflation and resilient economic activity justify tighter policy.
The dot plots that track expectations among the rate-setters point to another increase this year and no cuts next year.
Having spent five years above the Fed's 2% target, that would mean a full eight years of higher inflation.
And that will continue to have an impact on the investment landscape for years to come.
geopolitical fragmentation and the need to duplicate supply chains as globalization fades, the need for greater energy security, persistent fiscal deficits as spending stays high and the ability to raise taxes is limited, not to mention the intense capital spending requirements of the AI boom.
Kevin Walsh's press conference after the rate decision was announced confirmed much of this.
He said that the Fed had removed accommodation rather than made policy restrictive.
And he said that the Fed would require clearer evidence that inflation was heading back to target.
That suggests that the markets were impressed by the show of independence from the Fed.
It seems likely that last week's hike was the first of several, perhaps a three to four rate hiking cycle.
Whether that is necessary will depend in large part on whether the AI spending boom continues.
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