October 9, 2026
The case for another Federal Reserve (Fed) rate increase this year grew stronger this week. The minutes of the Fed’s September meeting, released on Wednesday showed most officials judged another quarter-point increase would likely be appropriate by year-end. Fed Governor Christopher Waller, a permanent voting member, said Thursday that he anticipates more hikes, which need not come at consecutive meetings, and that policy will focus on inflation in the near term. He cited inflation above the Fed’s 2% target for more than five years, the oil shock from the Middle East conflict, and spending on artificial intelligence as key drivers. Together, the minutes and Waller’s remarks left little doubt the Fed’s priority remained bringing inflation back to target.
Businesses and consumers sent different signals about the strength and direction of economic growth. On the business side, the S&P Global composite purchasing managers’ index (PMI) held at 58.4 in September and the Institute for Supply Management (ISM) services index came in at 54.9, both in expansion territory. Service firms also paid more to serve their customers, as ISM prices paid rose to 74.0. On the consumer side, University of Michigan sentiment fell to 46.3 in October, a five-month low, and the New York Fed’s one-year inflation expectations rose to 3.9%. Borrowing costs also rose, as the average 30-year mortgage rate climbed to 7.40%, the highest since November 2023. Jobless claims held low at 197,000, signaling a steady labor market.
Global bond market weakness lifted the 10-year Treasury yield to 5.36% intraday Wednesday, before strong auction demand pulled yields back. For the week, the 2-year yield fell 3 basis points to 4.80%. The 10-year slipped 2 basis points to 5.25%, leaving the 2-year/10-year spread unchanged at 45 basis points. In equities, the S&P 500 rose 1.1% to 7,807, near Tuesday’s record high, as gains in technology stocks outweighed a Thursday decline on concerns about artificial intelligence revenue. Earnings season began, with PepsiCo beating estimates but trimming its outlook and Delta cutting its forecast on higher fuel costs, while the bulk of reports are due in coming weeks. West Texas Intermediate crude oil was little changed at $91.64 a barrel, as a Thursday jump on tanker attacks and a Gulf hurricane offset earlier losses. Gold rose 1.15% to $4,189.02 an ounce. Market data are as of this writing.
The Chandler team expects at least one more quarter-point increase this year, with December more likely than October. Forecasts call for next Wednesday’s consumer price index to rise 0.6% in September, lifting the annual rate to 3.6% from 3.4%. A firmer reading would pull that timing forward, raising the odds of a federal funds rate increase at the Fed’s October 28 meeting. With short-term yields tracking the policy rate and investors demanding more yield for longer maturities, the yield curve should steepen gradually. The Chandler team continues to emphasize high credit quality, ample liquidity, and disciplined duration management, positioning client portfolios to reinvest at higher yields.
Next Week: Consumer Price Index (CPI), Initial and Continuing Jobless Claims, Retail Sales, Producer Price Index (PPI), Fed Beige Book, Industrial Production and Capacity Utilization, Existing Home Sales, Empire State Manufacturing Survey, Philadelphia Fed Business Outlook, National Federation of Independent Business (NFIB) Small Business Optimism Index, ADP Weekly Employment Change. The bond market is closed Monday for Columbus Day.
Written by Jayson Schmitt, CFA, Co-Chief Investment Officer