HighIV Macro Policy & Sovereign Debt17 September 2026, Thursday
Fed dot plot median for 2026 rises to 4.00-4.25% while the 10-year yield eases from 5.04% to 4.94%
The projections published after the increase signalled further tightening this year; even so, bond yields eased on 17 September and jobless claims fell to 196,000.
The economic projections published with the Fed's meeting of 16 September 2026 suggest the rate increase may not be a one-off. According to BondSavvy's compilation, the dot plot puts the median federal funds rate in the 4.00-4.25% range for the end of both 2026 and 2027; 12 participants placed the end of 2026 a quarter point above the current level, while 4 participants foresaw two further quarter-point increases. The chart contains 18 dots for 2026 and 2027 and 17 for 2028 and 2029. The same projections foresee PCE inflation of 3.7% in 2026 and 2.3% in 2027; real growth of 2.3% and 2.4% respectively; and an unemployment rate of 4.1% in both years.
The market reaction ran counter to the direction the projections pointed to. According to TradingEconomics, the US 10-year bond yield eased to 4.94-4.95% on 17 September; the 5.04% seen during the week was the highest level since 2007. In the closes of 16 September reported by Investrade, the S&P 500 fell 0.45% to 7,551.81, the Dow Jones 1.21% to 51,461.90, the Nasdaq 0.01% to 25,978.43 and the Russell 2000 0.40% to 2,858.81; the two-year yield rose to 4.744%, its highest level since July 2024. On the morning of 17 September futures recovered: the Dow was up 0.70% at 52,278, the S&P 500 up 0.80% at 7,684 and the Nasdaq up 1.05% at 29,563. Labour data released the same day did not support the relief on the bond side either: according to FRED records, initial jobless claims fell to 196,000 in the week ending 12 September; as TradingEconomics reported, that is a fall of 10,000 from 206,000 the previous week and below the expectation of 208,000. Continuing claims fell to 1,730,000 and the four-week average to 203,250. The Rio Times bulletin of 17 September put the dollar index at 100.331 and the VIX at 17.71.
Talay assessment
Bottom line
With the dot plot showing a median of 4.00-4.25% for the end of 2026 and 2027, the easing of bond yields from 5.04% to 4.94% suggests the market does not fully believe the Fed's projection. Jobless claims of 196,000, meanwhile, show that the labour market remains tight and that pressure on the inflation side will not resolve easily. The most likely path is for yields to keep fluctuating around 5%.
Likely effects
- Global borrowing costsNegativeWeeks
The US 10-year sticking to the 5% threshold lifts the risk-free anchor worldwide. Emerging economies' bond issuance costs and corporate credit spreads are rising in line with that anchor.
- The dollar and commoditiesNegativeWeeks
The dollar index rising to 100.331 shows the rate increase cycle working in the dollar's favour. A strong dollar weighs on dollar-denominated commodity prices while adding to the bill for importing countries.
- Spillover to TürkiyeNegative1–6 months
US yields staying high raises Türkiye's eurobond costs and external financing pressure on the lira. The Fed's expectation of a further increase works as an external condition narrowing the CBRT's room to cut.
Possibilities, ranked
- 1Yields fluctuate around 5%50%
The Fed keeps its signal of a further increase, the data flow stays mixed and the 10-year yield moves in a 4.80-5.10% band.
Watch: October and November CPI and PCE data, and whether the 10-year yield passes its 5.04% peak.
- 2A further increase is priced in and yields set a new peak30%
Inflation stays above the projected 3.7%, the market prices a second increase within the year and the yield rises above 5.04%.
Watch: PCE inflation accelerating on the month and the two-year yield passing its 4.744% peak.
- 3The labour market deteriorates and rate-rise expectations unwind20%
Jobless claims rise rapidly, the Fed steps back from its signal of a further increase and yields fall markedly.
Watch: Weekly claims rising above 250,000 and continuing claims rising markedly from 1,730,000.
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- US 10-year yield▼ 4.94%
- Dollar index▲ 100.331
- VIX▲ 17.71
Historical context