Fed Turns Hawkish but Can Wait on the Next Hike

TL;DR: Federal Reserve officials now lean toward more rate hikes, but the September minutes and recent speeches say they can wait for more data first. Markets price a pause at the October meeting and a quarter-point hike in December. The policy rate sits at 3.75% to 4%.

I ran QA on a nuclear submarine before I raised a dollar, and the habit stuck: you don't sign off on a trend that hasn't happened yet. A Fed that leans toward hikes but hasn't made one is the hardest setup to price, and it's exactly when a sponsor will quote you a projected yield and hope you skip the comparison. (source: foxbaltimore.com)

What did the Fed actually say?

Officials are signaling more hikes but not rushing them. The Sinclair National Desk report says the Fed is taking an increasingly hawkish outlook on inflation and that more increases are likely, with no hurry to deliver them.

The rate itself is not in dispute. In a speech on October 8, Governor Christopher Waller said the FOMC voted in September to raise the policy rate 25 basis points to 3.75% to 4% after holding steady for nine months. He was direct about what comes next. If the data keep coming in as expected, he anticipates additional hikes to bring inflation back to the Fed's 2% goal sooner.

Why can the Fed wait?

The data gave them a reason. The same report, as published by the Baltimore Sun, says the September minutes and official comments show officials don't expect inflation to recede without further action, but they can watch how the data develop before moving again.

August jobs were soft: 29,000 added, unemployment at 4.2%, and wages struggling to keep up with inflation. A weak labor market takes pressure off the Fed to move immediately. Core inflation on the Fed's preferred gauge also slowed to 3% in August.

But inflation has now run above the 2% target for more than five consecutive years. Waiting is a pause in the schedule. It isn't a change of mind.

What are markets pricing?

Markets expect a pause this month and a hike later. The table shows how that has moved.

Meeting	Market pricing	Source
October 27-28	Nearly 80% chance of a pause, as of Thursday, October 8	Sinclair report via Fox 23
October 27-28	Around 70% chance of an increase a few weeks earlier	Sinclair report via Fox 23
December	Another quarter-point hike is the most likely outcome	CME FedWatch, via Baltimore Sun

That is a sharp reversal. On October 6 I wrote about the dollar index, and the FedWatch odds for an October hike were above 70% then. Three days later the market leans the other way. I don't treat one day's pricing as a thesis.

What does it mean for you as an accredited investor?

If you are deploying $500K or more after selling a business, a rate path that stays higher for longer changes the math on everything illiquid. Cash and short Treasuries earn more when the policy rate sits near 4%, so a private credit or real estate fund has to clear a higher bar to justify its lockup. I walked through that trade-off in the piece on the Fed's last hold and private credit spreads.

Here is what that bar looks like in practice. A syndication or credit fund quoting a projected yield is quoting a target, not a result. Ask for realized returns on full-cycle deals, ask what happened in the bad ones, and ask how much of the stated yield survives after fees. Illiquidity is a cost. If the sponsor can't show you being paid for it, don't take it.

Floating-rate lenders can benefit from higher rates, and I covered the catch in the BDC income piece. If you hold inflation-sensitive assets, my 2026 guide to real assets as inflation hedges is where I'd start.

Energy is the risk I'd watch. Waller said hopes for a quick end to the Middle East conflict faded, and experts warned that low inventories and damaged infrastructure could keep oil prices high through 2027. The Fed doesn't control oil. The hike path can move without any Fed decision.

Common mistakes

Reading "room to wait" as "done hiking" is the one I see most. Don't. The same officials who see room to wait also say more hikes are likely if the data hold.

Other investors anchor on a single probability and plan around it. The October odds went from about 70% for a hike to nearly 80% for a pause within weeks, so plan for a range.

And then there's the headline yield, which tells you nothing until you compare what the fund pays you for the lockup against what you could earn without one.

FAQ

Did the Fed raise interest rates?

Yes. According to Governor Waller, the FOMC voted in September to raise the policy rate 25 basis points to 3.75% to 4%. It was the first move after nine months of holding steady.

Will interest rates go up?

Probably, but not necessarily this month. Markets price a pause in October and see a quarter-point hike in December as the most likely outcome, per CME FedWatch via the Baltimore Sun. Data could change that.

How does raising rates affect inflation?

Higher rates make borrowing costlier and slow demand, which tends to ease price pressure. Waller said he expects more hikes to help return inflation to the 2% goal sooner.

What happens to inflation if the Fed cuts interest rates?

Cuts can support demand and prices. Per Waller, the Fed cut 75 basis points over three meetings in the second half of 2025 before raising in September.

What to do today

Before the October 27-28 meeting, write down the yield you would need from any illiquid deal to beat a Treasury bill after fees, then hold the offering you're considering up against it. If the sponsor can't clear that number on realized returns, you have your answer. And if you want this kind of read each week, sign up for the free AIN briefing.

Educational content only. Not investment, tax, or legal advice. Not an offer or solicitation to buy or sell securities. Past performance does not guarantee future results. Private-market investments are illiquid and involve risk of loss, including total loss of capital. Consult qualified advisers. Angel Investors Network is not a broker-dealer or investment adviser.