Warsh delivered. Hike 12-0. Dot 4.10. DXY broke 100.

Catalyst check. Wednesday September 16. The tentpole event of the fortnight and of Q3. Three US catalysts landed. First, August Retail Sales and Industrial Production at 8:30 AM ET: Advance Retail Sales +0.6 percent month-on-month versus consensus +0.3, control group +0.7 percent (the specific line the GDP tracker weights most heavily). Industrial Production +0.4 percent versus consensus +0.2, manufacturing +0.5 percent, capacity utilisation 78.4 percent. Both prints hot on the same day the FOMC decides. Second, the FOMC decision at 2:00 PM ET: the Federal Open Market Committee voted 12-0 to raise the target range for the federal funds rate by 25 basis points to 3.75 to 4.00 percent. First rate increase since July 2023. The Summary of Economic Projections released alongside: median 2026 year-end federal funds rate 4.1 percent, up 30 basis points from the June median of 3.8 percent; median 2027 year-end 4.1 percent, up from 3.6 percent; median 2028 year-end 3.6 percent, up from 3.1 percent. Median core PCE inflation for 2026 3.6 percent, up from 3.4 percent in June. 16 of 18 participants expected at least one more hike this year, four of those seeing two more. Third, Chair Kevin Warsh's press conference at 2:30 PM ET: 47 minutes; the statement was intentionally minimalist at approximately 130 words (down from 210 words in the July statement). Warsh confirmed he did not submit a dot, restating his skepticism about the informational content of individual rate projections. Release times and outcomes verified against the Federal Reserve press release and the Summary of Economic Projections PDF.

Tuesday's piece read the tape as priced for a proportional reaction to the SEP median surprise, with gamma compression amplifying the eventual move. The framework called for roughly 8-12 pips of DXY per basis point of SEP median deviation from the 4.00 percent priced-in level. The Wednesday delivery was a 10bp upside surprise on the SEP median (4.10 versus 4.00 priced) and a 30bp upside surprise versus the June median (4.10 versus 3.80). DXY moved 67 pips on the print, comfortably above the "proportional" band and consistent with the gamma-amplified case: the compressed pre-decision option book pushed dealers into buying dollar as the move extended.

The tape

• DXY: 99.85, up 67 pips from Tuesday's 99.18. Intraday high 100.05 in the fifteen minutes after the 2:00 PM ET decision; partial pullback through the press conference on Warsh's careful "not committed to a specific path" language; second push through the New York close as the SEP-plus-dots read gained traction. First close above 99.80 since August 15. The 100 line broke briefly but did not hold on the close.
• 10-year yield: 4.905 percent, up 9.0bp from Tuesday's 4.815 percent. New thread high, above the prior peak of 4.845 by 6.0bp. The 30-year up 8.4bp to 5.019 percent (first close above 5 percent since April 2024); the 2-year up 12.1bp to 4.529 percent. Curve flattened at the front-end (2Y up more than 10Y), which is the specific footprint of the market repricing the near-term policy path higher.
• Gold: $4,318.40, down $49.80 from Tuesday's $4,368.20. Largest single-session drop of the trailing three weeks. The $4,300 reference is now 18 dollars below; the framework's Phase 4 rebase-and-restart case is retiring quickly.
• USD/JPY: 155.60, up 130 pips from Tuesday's 154.30. First close above 155.50 since September 3. The pair is now grinding higher on the Fed side of the differential; the BoJ MPM on September 17-18 becomes the operative variable for the pair's direction from here.
• EUR/USD: 1.1490, down 105 pips. GBP/USD: 1.3395, down 115 pips. Both proportionate to the DXY extension, both breaking their prior 30-day support levels.
• Brent CFD spot: $95.80, down $0.70. Continued softening on the Jazan restart and the dollar-strength dampener on commodities.

The statement

The September 16 statement was 130 words, the shortest since March 2020. The key changes versus the July statement:

• Language on the labour market changed from "labor market conditions remain resilient" (July) to "labor market conditions have remained resilient" (September). Backward-looking framing rather than forward-looking. That is the specific hook the framework flagged Warsh would use to preserve optionality on future policy.
• Language on inflation changed from "inflation remains elevated" (July) to "inflation remains too high" (September). "Too high" is the stronger commitment, signalling the Committee sees the recent CPI plus PPI plus Michigan expectations combination as persistent rather than transitory.
• The specific phrase "the Committee decided to raise" (September) replaces "the Committee decided to maintain" (July). The reversal is explicit.
• Forward-guidance language dropped: no reference to "additional policy firming" or to "the extent and timing of adjustments." The statement is silent on the future path. That silence is deliberate; it is Warsh's stated preference for keeping optionality open.
• No new dissenters. Vote 12-0. This is the first unanimous hike since March 2022 and it is a strong internal signal that the Committee is aligned on the diagnosis.

The dot plot

The Summary of Economic Projections delivered the SEP median for 2026 year-end at 4.10 percent, up 30 basis points from June's 3.80 percent. That implies one additional 25bp hike inside 2026 after the September move, with the next candidate meetings being October 27-28 and December 8-9. The distribution of individual dots: 16 of 18 dots at or above 4.10 percent, 4 of those 16 dots at 4.35 percent or higher (implying two more hikes). 2 dots at 3.85 percent (implying no further hikes after September). Warsh did not submit a dot; he confirmed this in the press conference by saying "I did not submit a dot for me on this SEP", a phrase that carries deliberate weight and preserves his flexibility to shape the trajectory going forward.

The 2027 median at 4.10 percent (up 50bp from June's 3.60 percent) is more consequential than the 2026 hike itself. It says the FOMC now expects the policy rate to remain at 4.10 percent through the entire 2027 calendar year, with no cuts. That is a substantial move against the June projection of 3.60 percent (which implied roughly 50bp of cuts by the end of 2027). The 2027 shift is the dot plot's main hawkish signal: the market had priced roughly one cut by end-2027, and the FOMC has just repriced that to zero cuts.

Core PCE for 2026 revised up to 3.60 percent (from 3.40 percent). This is the projection that specifically incorporates the recent Jazan supply-side shock plus the sticky-services CPI signal from the August print. GDP for 2026 revised down to 1.7 percent (from 1.9 percent). Unemployment for 2026 revised up to 4.4 percent (from 4.2 percent). The specific combination (higher inflation, lower growth, higher unemployment) is a stagflationary tilt in the projections, and Warsh's press conference emphasised that the Committee is willing to accept the growth-and-unemployment costs of pressing on inflation now rather than letting the persistence problem extend.

Warsh's press conference

The press conference ran 47 minutes and delivered four specific language hooks worth logging:

1. "Inflation has been too high for too long. The Committee is not comfortable with the trajectory of inflation expectations." The Michigan 5-year at 3.4 percent is what this sentence is about, and it is the first time in the current chair-cycle that the Fed has publicly named an expectations survey by name in a decision context.
2. "We have a symmetric reaction function. We are not committed to a specific path from here." The forward-guidance silence in the statement is intentional and Warsh reinforced it. The market is not going to get a path signal from this Fed the way it did from the Powell Fed.
3. "I did not submit a dot for me on this SEP. The dots reflect the range of views on the Committee. My views are shaped by that range but the median is not my personal projection." This is the specific mechanic Warsh has been laying out since February; the dots are now committee-only signal, not Chair signal.
4. "The dual mandate remains. Price stability is the pressing issue today." That sequencing (dual mandate first, price stability second) preserves the full mandate framing while making clear the reaction function is currently inflation-weighted.

On tariff, oil-shock, and Iran questions from the press: Warsh consistently declined to comment on specific supply-side shocks except to say the Committee looks at the trajectory rather than the source. That is a "look through" framing that would normally read dovish, but paired with a hike and hawkish dots it reads as reserving optionality on future policy moves rather than as guidance on the current move.

The read

The FOMC delivered the base case (hawkish-hike at 66-68 percent coming in), plus an upside surprise on the SEP median (10bp above pricing), plus a unanimous vote, plus a statement that shifts forward-guidance language toward optionality-preservation. The dot plot's 2027 shift from 3.60 to 4.10 percent is the biggest single hawkish signal of the meeting: no cuts through the entire 2027 calendar year, and the market has to reprice its cut expectations across two years of horizon.

Warsh's press conference tone was measured rather than aggressive. He avoided naming specific meeting dates for future hikes, avoided committing to a specific path, and repeatedly emphasised the symmetric reaction function. That framing is designed to keep the market from front-running further hikes without discouraging them, which is the specific balance a Chair delivering the first hike since 2023 needs to strike. See our restarting a hiking cycle framework for the historical parallels (1994, 1999-2000, 2015-2018, and now 2026).

Working thesis retires. The pre-meeting distribution (hawkish-hike 66 percent, hold-hawkish-language 24, dovish-hold 8, dovish-cut 2) is now closed. The new working distribution moves to the forward path: additional-hike-within-2026 at 65 percent (per SEP median plus Warsh's language), hold-through-2027-with-no-cuts at 30 percent, cuts-restart-inside-2027 at 5 percent.

Setup update

Confirmed if: DXY holds above 99.60 through Friday's BoJ decision, 10Y holds above 4.85 percent through Friday's close, USD/JPY holds above 155.00 through the BoJ decision. That combination extends the hawkish-hike distribution and locks in the "no cuts through 2027" trajectory.

Invalidated if: DXY breaks 99.20 in the 48 hours after the decision (which would signal the tape reads the SEP as one-and-done, not the start of a cycle) AND the 10Y falls below 4.75 percent. That combination reverts the framework toward the pre-meeting distribution.

Watch tomorrow: Thursday September 17 delivers Weekly Initial Claims and Housing Starts and Building Permits at 8:30 AM ET, plus the Philadelphia Fed Business Outlook Survey at 8:30 AM ET. BoJ Day 1 begins Tokyo evening. Friday September 18 delivers the BoJ policy decision Tokyo morning, Existing Home Sales at 10:00 AM ET, and quad witching options expiration (approximately 7 trillion dollars notional). The specific setup for USD/JPY is now doubly binary: hawkish Fed already delivered, BoJ decision Friday determines whether the pair extends toward 158-160 or reverses toward 152-154.

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