First Rate Hike in Three Years Calms Bond Vigilantes for Now. The Federal Open Market
Committee (FOMC) hiked rates this week to 3.75-4% and suggested another hike to come by the end of
the year as inflation remains well above their comfort levels. Markets generally responded well to the
news. The chair indicated that recent data indicates a strong economy and labor market and made the
move to support price stability. Economic data confirmed the FOMC’s view that the economy is on
solid footing. Retail sales were extremely strong, rising 1.2% month-on-month versus forecasts for
0.8% and import prices came higher than expected while export prices missed their mark. Initial
jobless claims and continuing claims were much lower than forecast, indicating strength in the labor
market. Housing starts and building permits missed expectations, showing that housing remains a
weak link. On Friday, industrial production, capacity utilization and the Conference Board leading
index all missed forecasts slightly.
Week Ending: September 18th, 2026
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