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TALAYINSIGHT
RegionAmericas

MediumIV Macro Policy & Sovereign Debt23 September 2026, Wednesday

Fed's Barr and Collins signal further hikes: October hike odds jump intraday from 55% to 70%, and the dollar index rises above 101

Fed Governor Michael Barr said in Chicago on 23 September that further rate adjustments will likely be needed to bring inflation back to target in a timely manner. Boston Fed President Susan Collins also wrote on 22 September that she supported a hike. The probability of a hike at the 27–28 October meeting rose intraday from 55% to 70%.

Location: CHICAGO

According to a Reuters report published on Yahoo Finance, Barr told the Chicago Fed's housing affordability conference that last week's 25 basis point hike was an important step in recalibrating rates, and said the risks to reaching the inflation target had increased while labour market risks had diminished. In the speech text cited by MarketScreener, Barr stressed that inflation is above the 2% target and shows no clear trend towards it in a timely manner; he listed tariffs, the Middle East conflict, the Russia-Ukraine war and the AI investment wave among the sources of price pressure. The policy rate has been in a 3.75–4.00% range since 16 September; according to Reuters, 16 of 18 Fed officials foresee at least one more hike by the end of the year. According to MarketScreener, Fed Chair Kevin Warsh presented the unanimity of last week's hike decision as a sign of commitment to price stability; Reuters noted that US national elections on 3 November 2026 will take place only days after the October decision.

According to information compiled by Briefs, Collins wrote in a LinkedIn post dated 22 September that the likelihood of scenarios in which inflation stays significantly above 2% had increased; Collins, who does not have a vote this year, expects a second hike before the end of the year. According to CME FedWatch data, the probability of an October hike rose intraday on 23 September from about 55% to 70%; MarketScreener wrote that the figure had been about 9% a month earlier. According to Reuters, the 30-year mortgage rate rose the same day to 7.12%, its highest in more than two years, and Brent futures rose 2% to about 101.09 dollars.

According to FXStreet, the dollar index rose above 101 for the first time since late July and the dollar/peso rose 1.25% to a two-month high of 17.50; markets are pricing about 93 basis points of Fed tightening by the end of 2027. The Bank of Mexico (Banxico) will announce its decision on 24 September at 13:00 Mexico City time; money markets assign a 79% probability to the rate being held at 6.50%. According to The Rio Times, headline inflation in Mexico was 3.26% in August and core 3.88%. The Banxico decision could not be verified at the time of writing.

Talay assessment

Bottom line

Barr's and Collins's remarks show that the 16 September hike was not a one-off and that the Fed is preparing for a second step in October; the market priced this by lifting the odds to 70%. A strong dollar and rising US yields increase currency pressure in countries such as Mexico, where interest-rate differentials are narrowing. The most likely path is a further 25 basis point hike in October.

Likely effects

  • Emerging-market currenciesNegativeWeeks

    The dollar index breaking above 101 and the peso weakening to 17.50 increase pressure on emerging-market currencies with narrowing interest-rate differentials.

  • US housing marketNegative1–6 months

    The 30-year mortgage rate rising to 7.12% slows sales and construction activity.

  • Türkiye's currency and reservesNegativeWeeks

    A stronger dollar and the Fed's signal of further hikes may increase pressure on the lira and the CBRT's need to draw on reserves.

Possibilities, ranked

  1. 1
    25 basis point hike in October60%

    The data flow stays hot and the Fed raises the range by 25 basis points on 27–28 October.

    Watch: September core PCE and employment data; CME FedWatch October odds

  2. 2
    Hold in October, hike in December30%

    Given proximity to the 3 November elections and market volatility, the Fed holds in October and signals December.

    Watch: Pre-October remarks by Fed Chair Warsh

  3. 3
    Tightening pauses10%

    Energy prices fall, inflation expectations decline and further hikes drop off the agenda.

    Watch: Brent futures falling durably below 100 dollars

Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.

Market reaction

Indicators affected

  • Dollar index▲ > 101
  • Dollar/peso▲ 17.50
  • October hike odds▲ 70%

Historical context

US dollar broad index, last 6 months

117.53118.59119.65120.71121.7624/0329/0405/0614/0719/0825/0917 September 2026 — Fed dot plot median for 2026 rises to 4.00-4.25% while the 10-year yield eases from 5.04% to 4.94%123 September 2026 — Fed's Barr and Collins signal further hikes: October hike odds jump intraday from 55% to 70%, and the dollar index rises above 1012
  1. 117/09 · Fed dot plot median for 2026 rises to 4.00-4.25% while the 10-year yield eases from 5.04% to 4.94%
  2. 223/09 · Fed's Barr and Collins signal further hikes: October hike odds jump intraday from 55% to 70%, and the dollar index rises above 101

Sources

  1. Yahoo Finance (Reuters) — Fed's Barr says further rate hikes will likely be needed
  2. MarketScreener — Fed's Barr Says More Rate Hikes Likely Needed to Return Inflation to Target
  3. Briefs — Boston Fed's Collins Backs Rate Hike, Warns on Inflation
  4. FXStreet — Mexican Peso selloff deepens as Fed hawks drive USD/MXN toward 17.50
  5. The Rio Times — Mexico's Rate Decision, Inflation Data and 2027 Budget All Land on 24 September