US stocks fall as Warsh warns inflation is still too high

• The Fed approved a unanimous 12-0 rate hike, with projections showing 16 of 18 participants expect at least one more increase ahead
• Bank stocks led declines with Bank of America and Wells Fargo dropping 3% each, while the 10-year Treasury yield held near 5%
• Warsh emphasized the Fed cannot control oil prices directly but will prevent energy inflation from spreading, citing inflation above 3% in too many categories

Summary

Federal Reserve Action and Market Response:

The Federal Reserve raised interest rates by 25 basis points to a target range of 3.75%-4% in a unanimous 12-0 vote on September 16, 2026. US markets sold off sharply following the decision, with the Dow Jones plunging 718 points, the S&P 500 declining 0.64%, and the Nasdaq Composite falling 0.31%.

Key Statements from Fed Chair Warsh:

Fed Chair Kevin Warsh emphasized that inflation "is too high, and has been for too long," noting that recent summer readings showed no meaningful improvement. He acknowledged monetary policy cannot directly address oil prices or supply-side disruptions but stressed the Fed would prevent energy-driven inflation from spreading throughout the economy. CPI and PPI data show too many categories exceeding 3% over six- and 12-month periods.

Future Rate Path:

The Fed's latest projections indicate further tightening ahead, with 16 of 18 participants expecting at least one additional rate increase, while four officials see the possibility of two more hikes. Rate cuts are projected for 2028 and 2029.

Market Impact:

Bank stocks were hit hardest, with Bank of America and Wells Fargo each dropping 3%, and JPMorgan Chase falling 1.9%. The 10-year Treasury yield remained near 5% at 5.008%, while the two-year yield rose 5 basis points to 4.717%.

Additional Factors:

Warsh cited stronger economic data, persistent inflation, geopolitical risks, and large-scale data center spending by tech companies as factors contributing to the current policy stance and higher long-term interest rates.