Fed Hiked Rates — Why Did Markets Stay Calm? Behind the Unanimous 12-0 Vote

Bora Özkent opens with a surprise — against his own hope, the Fed hiked 25bp, unanimously 12-0, lifting the target range to 3.75-4.00%. It is Chair Kevin Warsh's first hike and the first increase since 2023, with the median projection at 4.1% for end-2026, keeping one more hike on the table this year. The unanimity matters: it signals resolve, not a split committee.

Why Didn't Markets Fall? The Intraday Swing

The knee-jerk reaction was a selloff. Nasdaq swung from +0.8% intraday to -0.5% after the statement, the Dow and S&P also slipped, while Nasdaq 100 clung to small gains. The close was calmer than feared: Nasdaq finished -0.1%, essentially flat, and the author's own portfolio ended positive. By early next morning, futures had flipped green — Nasdaq around +0.9%, Dow and S&P higher, and Treasury yields that had pushed above 5% the day before were easing.

What Do the Projections Say?

The updated Summary of Economic Projections softened the story. Core PCE for end-2026 was nudged to 3.4% from 3.3%, but 2027 at 2.5%, 2028 at 2.2% and 2029 at 2.0% were almost unchanged — the Fed's September 16, 2026 projection materials show the same path, keeping the 2% goal intact. The message reads as: one more move possible this year, no hike next year, cuts thereafter. With the October meeting landing just before elections, markets already price a skip then, pushing the next live meeting to December.

Chair Warsh sounded tougher than the dots. His lines — 'not confident policy is sufficiently restrictive' and 'not seeing a strong enough disinflation trend' — triggered the initial drop. He also said the projections were not his personal forecast, that the Fed is not in the guidance business, and that policy will follow trend data, not a single print. Markets heard the hawkish soundbites but weighted the limited dot path more heavily.

That duality explains the calm. The latest core CPI is the lowest since March 2021, near 2.4%, down from 3.4% when the Fed last cut under Biden — data itself does not demand aggressive tightening. What investors wanted was a credibility signal: that Warsh can hike even under pressure from President Trump. That box is now checked. With no scary longer-run path and a one-and-done tone, pricing settled on: one hike done, one more possibly left as insurance, then wait-and-see.

Trump, Housing and Oil

Trump helped cool temperatures. He repeated his call for rates at 1% or below but said support for Warsh continues and that there had been contact before the meeting. Markets read it as no fight, a packaged outcome — tolerating 25bp to ease pressure from the bond market. That perception of a political truce aided the bid in equities.

As Özkent notes, housing is where the bite is felt. U.S. 30-year mortgage rates are still hovering 6-8%, and another hike keeps first-time buyers on the sidelines — real-estate channels were already bracing for slower activity. For AI capex, a single 25bp move is noise, not a stop sign; a 2022-style hiking cycle would be a different story. Hence today's two telltales: can Nasdaq reclaim its 50-day moving average, and do 10- and 30-year yields keep pulling back if the Fed's message convinces bond investors?

Oil buys time until December. Saudi Arabia's precautionary shutdown of the East-West Petroline, an alternative to Hormuz, had tightened supply fears; now reports suggest 50% of capacity could return within days, which would ease pressure. The same day brought claims that Houthis shot down a Saudi F-15 with a domestically developed rocket — a reminder that war risk is not gone, especially after earlier complaints that advanced models were used to refine such weapons. With no October hike expected, a reopened pipeline and softer Iran tensions could let crude ease and trim inflation fears. Tomorrow is Opex in the U.S., and the video's SPY weekly-close guess near 750-800 reads as a mangled level rather than a precise target — the point is markets are still searching for direction after the decision.