BREAKING: The FED Just RAISED Interest Rates - Stocks Falling, Housing Market FROZEN!
In a Nutshell
The Fed just hiked rates 25 bps for the first time since 2023 because inflation (CPI 3.4%, PPI 5.4%) and strong job growth (162k payrolls) give them room to act, and they now expect one more hike this year with rates held through most of 2027. Stocks are falling because strong economic data reduces the odds of future rate cuts, while housing is normalizing with higher mortgage rates (~7%) and rising inventory rather than crashing. The two paths ahead are either debt-driven inflation and volatility, or AI-fueled productivity growth that could add several percentage points to annual GDP.
These notes were generated by AI and may contain inaccuracies.
For the first time since 2023, the Federal Reserve raised interest rates by 25 basis points. This marks the end of a rate cutting era and raises questions about whether this signals the beginning of a new rate hiking cycle. Inflation is moving in the wrong direction again, the government is adding more than two trillion dollars a year to the national debt, and a bond market bailout is not making a difference. The Fed might keep interest rates higher at the exact moment the economy could least afford it.
The Federal Reserve measures inflation through multiple metrics. Producer price inflation measures the increase businesses pay before it reaches consumers, with the latest reading at 0.4% month-over-month and 5.4% over the last year. CPI, the headline inflation number, came in at 3.4%. The majority of this inflation came from oil prices.
The Federal Reserve's objectives include ensuring prices don't skyrocket and people stay employed. August payrolls rose by 162,000 jobs, more than double the expectation. This strong employment data gives the Federal Reserve room to raise rates without impacting people's ability to find work.
In 2026, bad news is actually good for stock prices. The stock market cares about lower interest rates, so weak job numbers, high unemployment, and horrible economic data are good for stocks because they increase the likelihood the Fed will lower interest rates. Conversely, strong job numbers, good economic data, and increased demand are bad for stocks. The market is in an environment where stocks want another hit of cheap money.
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