The Federal Reserve meets on September 15 and 16. The decision comes out on the 16th.
For most of this year, the question was when rates would come down. That question has flipped. Markets now think a rate increase is more likely than not.
This piece is written for people running businesses, not for people trading. The two care about different things. A trader cares about the next two hours. A business owner cares about what borrowing costs for the next two years.
What is actually on the table
The current target range is 3.50% to 3.75%. A quarter-point increase would move it to 3.75% to 4.00%.
That is it. One quarter of one percent.
The odds have been swinging. Before Fed chair Kevin Warsh spoke at Jackson Hole in August, futures markets put the chance of a hike at around 36%. After the speech, it went above 50%. Recent readings from the CME FedWatch tool have sat near 58%.
Two more things moved the needle. The August jobs report came in strong, with 162,000 jobs added. And Fed governor Christopher Waller said on September 3 that inflation is still meaningfully above the 2% goal and a September increase may be appropriate.
The Fed is also not united. At the July meeting, three of the twelve voting members already wanted a hike.
One more number lands before the decision. August inflation data is published on September 11. A hot reading pushes the odds up. A cool one pushes them down.
Why inflation is not going away
The short answer is oil.
The conflict between the US and Iran has kept a risk premium on crude all year, with disruption around the Strait of Hormuz adding to it. WTI has more than doubled from its late-2025 lows and has been sitting in the $75 to $85 range.
Energy prices do not stay in the energy line of a budget. They move through everything. Trucking costs rise, so goods cost more. Packaging costs rise. Utility bills rise. Inflation reached a three-year high in the spring, driven mainly by energy.
Some economists have warned that oil could push toward $120 a barrel if supply disruptions continue and reserves cannot cover the gap. That is a warning, not a forecast. But it is the scenario the Fed is trying not to be late for.
Why a quarter point matters even though it is small
Cleveland Fed president Beth Hammack has made the obvious point out loud. A quarter point does not do much on its own.
She is right about the arithmetic and that is not the reason to pay attention.
The reason is direction. For two years, most business planning has quietly assumed money gets cheaper eventually. Deferred projects, floating rate debt, refinancing plans, valuations built on a lower discount rate. All of it rests on the same assumption.
A hike says the easing cycle is over for now. That is a much bigger change than 25 basis points.
There is also a number most business owners should watch more closely than the Fed rate itself. The 10-year Treasury yield has climbed to around 4.80%, its highest since late 2023. Long-term business borrowing tends to track that, not the overnight rate. It has already moved, whether or not the Fed does anything next week.
Four things worth checking this week
Your floating rate debt. If you have a working capital line or a term loan tied to a benchmark, work out what another quarter point costs you over twelve months. Then work out what three more would cost, because the July meeting minutes showed the market pricing in a further increase by early next year.
Any project with a long payback. A capital investment that made sense at one cost of money may not at another. This is not a reason to cancel things. It is a reason to redo the maths before you commit, rather than after.
Your refinancing calendar. If debt comes due in the next eighteen months, the assumption that you will roll it at a better rate is now a weaker assumption than it was in January.
How fast your customers pay. This one gets missed. When money is expensive, your customers stretch their payables. Your receivables get slower even when nothing about your business changes. That shows up as a cash problem, not a rate problem, so it is easy to misdiagnose.
The part nobody can tell you
It is close to a coin flip. Somewhere around 55 to 60 against 40 to 45, and it will move again after Friday’s inflation data.
So the useful move is not to guess. It is to make sure your plan does not break under either outcome.
If your budget only works if rates fall, you do not have a budget. You have a bet.
Check back after the 16th, when there is an actual decision to react to rather than a probability.
