Federal Reserve
Updated
Summary
The Federal Reserve is the US central bank. Congress gives it two goals, maximum employment and stable prices, which the Federal Open Market Committee (FOMC) pursues by setting a target range for the overnight federal funds rate and by managing the Fed's balance sheet. The FOMC has twelve voters: the seven-member Board of Governors in Washington, the New York Fed president and four rotating Reserve Bank presidents. The Board also supervises state member banks, and under the 2025 GENIUS Act it is one of the regulators writing rules for payment stablecoin issuers. Kevin Warsh has been Chairman since 2026-05-22; his predecessor, Jerome Powell, remains on the Board as a governor. Because dollar borrowing costs worldwide key off its rate, its decisions move Treasury yields, the dollar and risk assets.
Key numbers
Federal funds target range: 3.75%-4.00% (raised 0.25 pt, 12-0) (as of 2026-09-16). Source: federalreserve.gov
Administered rates: IORB / ON RRP / standing repo / primary credit: 3.90% / 3.75% / 4.00% / 4.00% (as of 2026-09-17). Source: federalreserve.gov
Balance sheet: Reserve Bank credit, week average: $6.71 trillion (+$162 billion on the year) (as of 2026-10-21). Source: federalreserve.gov
Holdings: Treasury securities / mortgage-backed securities: $4.57 trillion (+$375 bn y/y) / $1.90 trillion (-$187 bn y/y) (as of 2026-10-21). Source: federalreserve.gov
Reserve balances / overnight reverse repo / Treasury General Account: $2.96 trillion / $327 billion / $952 billion (as of 2026-10-21). Source: federalreserve.gov
SEP median federal funds rate, end-2026 / end-2027 / longer run (forecast): 4.1% / 4.1% / 3.2% (as of 2026-09-16). Source: federalreserve.gov
Participants seeing at least one more 2026 hike (dot plot): 16 of 18 (as of 2026-09-16). Source: federalreserve.gov
SEP median 2026 PCE / core PCE inflation (forecast): 3.7% / 3.4% (as of 2026-09-16). Source: federalreserve.gov
PCE / core PCE inflation, 12 months to August: 3.4% / 3.0% (as of 2026-09-30). Source: bea.gov
CPI / core CPI, 12 months to September: 3.7% / 2.6% (CPI +0.6% m/m) (as of 2026-10-14). Source: bls.gov
Unemployment rate / payrolls, September: 4.2% / +29,000 (as of 2026-10-02). Source: bls.gov
GENIUS Act proposal (R-1899) comment deadline: 2026-11-30 (as of 2026-09-29). Source: federalregister.gov
Timeline
2026-10-22 — H.4.1: Reserve Bank credit averages $6.71 trillion; Treasury holdings up $375 billion on the year while MBS run off $187 billion. (Source: federalreserve.gov)
2026-10-21 — OCC issues the first final GENIUS Act rule among bank regulators, effective 2027-01-18; the Fed's rule is still a proposal. (Source: occ.gov)
2026-10-14 — BLS: September CPI +0.6% m/m, 3.7% y/y, core 2.6%; Beige Book says higher oil prices appeared in every District. (Source: bls.gov)
2026-10-08 — Governor Waller says he anticipates additional hikes, not necessarily at consecutive meetings. (Source: federalreserve.gov)
2026-10-07 — September minutes: most participants see another increase as likely appropriate by year end; reserve management purchases paused. (Source: federalreserve.gov)
2026-10-02 — BLS: September payrolls +29,000, unemployment 4.2%, July and August revised down 60,000. (Source: bls.gov)
2026-09-30 — BEA: August PCE inflation 3.4%, core 3.0%. (Source: bea.gov)
2026-09-29 — Fed GENIUS Act proposal (Docket R-1899) published in the Federal Register; comments due 2026-11-30. (Source: federalregister.gov)
2026-09-24 — Board proposes reserve, capital, custody and application rules for Board-supervised stablecoin issuers; Barr backs it with AML reservations. (Source: federalreserve.gov)
2026-09-16 — FOMC raises the target range to 3.75%-4.00% by 12-0; 16 of 18 participants project at least one more 2026 hike. (Source: federalreserve.gov)
2026-07-29 — FOMC holds at 3.50%-3.75% by 9-3; Hammack, Kashkari and Logan dissent for a hike. (Source: federalreserve.gov)
2026-06-17 — First FOMC under Warsh holds at 3.50%-3.75%, 12-0, naming energy among supply shocks. (Source: federalreserve.gov)
2026-05-22 — Kevin Warsh sworn in as Chairman (term to 2030-05-21); Powell's chair term ends and he stays on as a governor. (Source: federalreserve.gov)
2026-05-21 — Governor Stephen Miran resigns from the Board. (Source: federalreserve.gov)
2026-05-15 — Bowman and Miran object to an open-ended designation of Powell as chair pro tempore. (Source: federalreserve.gov)
2025-12-10 — FOMC cuts to 3.50%-3.75% by 9-3 and judges reserves ample, starting Treasury purchases as needed. (Source: federalreserve.gov)
Key actors and links
Kevin Warsh (actor:kevin-warsh): Chairman since 2026-05-22; chaired the June and July holds and the September hike.
Fed funds / policy rate (indicator:fed-funds-rate): The Fed's main tool: target range 3.75%-4.00% since 2026-09-17.
Fed balance-sheet / QT policy (indicator:fed-balance-sheet): About $6.7 trillion; Treasury bills bought to keep reserves ample while MBS run off.
Fed tightening / restrictive policy (policy:fed-tightening): The September 2026 hike and a median path of one more in 2026 (forecast).
Fed reaction function (theme:fed-reaction-function): How the FOMC weighs elevated inflation against a 4.2% unemployment rate.
U.S. headline/core CPI (indicator:us-cpi): September CPI 3.7% y/y and core 2.6%, two weeks before the October meeting.
U.S. labor market (theme:us-labor-market): Payrolls +29,000 in September with downward revisions; the employment side of the mandate.
Energy shock (theme:energy-shock): Oil and diesel costs the minutes, Beige Book and Waller cite as lifting inflation.
Energy-driven inflation pressure (theme:energy-driven-inflation): Energy pass-through is why most participants lean to another hike.
U.S. Treasury (actor:us-treasury): Its bill issuance sets the TGA and reserve levels; joint GENIUS Act AML and sanctions rules.
U.S. Treasuries (market:us-treasuries): The Fed holds $4.57 trillion of Treasury securities, rolled over at auction.
SOFR (indicator:sofr): Repo rates trade just below IORB (3.90%) inside the Fed's administered-rate corridor.
Stablecoins (theme:stablecoins): The Board's R-1899 proposal would set reserve, capital and redemption rules for issuers it supervises.
ECB (actor:ecb): Also raising rates in 2026 against the energy shock; cited in the September minutes.
U.S. Senate (actor:us-senate): Confirmed Warsh as a governor on 2026-05-12 and as Chairman on 2026-05-13.
Why it matters now
The Fed has turned from cutting to tightening. It cut to 3.50%-3.75% on 2025-12-10, held there in June and July 2026, then raised the range to 3.75%-4.00% on 2026-09-16 by 12-0, saying inflation "remains elevated". The July hold already had three dissents for a hike (Hammack, Kashkari, Logan). The June and July statements named energy among the supply shocks pushing prices up, and the September minutes tie higher inflation partly to energy and input costs from geopolitical events. The data since then have not eased the case. August PCE inflation was 3.4% and core 3.0% (BEA, 2026-09-30); September CPI rose 0.6% on the month and 3.7% on the year (BLS, 2026-10-14). The October Beige Book says higher oil prices appeared in every District's report. Labour data are softer: September payrolls rose 29,000, July and August were revised down 60,000, and unemployment was 4.2%. In the September projections (forecast), 16 of 18 participants placed the year-end rate above the current range, with a median of 4.1%, and Governor Waller said on 2026-10-08 he anticipates additional hikes.
Leadership and plumbing also changed. Warsh was sworn in on 2026-05-22 after Powell's chair term ended, following a public dispute by two governors over an open-ended interim chair; Governor Miran resigned on 2026-05-21. The balance sheet is growing again: Reserve Bank credit averaged $6.71 trillion in the week to 2026-10-21, $162 billion more than a year earlier, as Treasury holdings rose $375 billion and mortgage-backed securities ran off $187 billion. The Fed pays 3.90% on $2.96 trillion of reserves. On stablecoins, the Board proposed GENIUS Act rules on 2026-09-24 for issuers it supervises (reserves, capital, redemption, custody, applications), with comments due 2026-11-30. The OCC finalised its own rule on 2026-10-21, effective with the Act on 2027-01-18, so the Fed's final rule is the next missing piece for bank-affiliated issuers.
Risks and open questions
Bull case: Read as the case that the Fed can bring inflation down without a sharp labour-market break. The committee moved early and unanimously in September, and most participants see one more hike by year end (minutes, 2026-10-07), which may keep expectations anchored. Core inflation is lower than headline: core CPI was 2.6% in September and core PCE 3.0% in August, so much of the overshoot is energy. The September projections show PCE inflation falling from 3.7% in 2026 to 2.3% in 2027 with unemployment steady at 4.1% and GDP growth of 2.3%-2.4% (forecast). The Beige Book reports growth in 9 of 12 Districts and no declines. Reserves of $2.96 trillion are judged ample and repo rates trade below IORB, so money markets have absorbed heavy bill issuance. Inference (AA): if oil prices ease, headline inflation could fall quickly and the Fed would not need to go far above 4%.
Bear case: Read as the case that the Fed is tightening into a supply shock with a weakening labour market. Payrolls rose only 29,000 in September, July is now negative, and two months were revised down 60,000. CPI rose 0.6% in a single month and all 12 Districts report price growth, with fuel surcharges passing diesel costs along supply chains, so pass-through may still be building. Waller says core PCE has run 2.5%-3.0% since spring 2024 without enough progress. The committee has split both ways within a year (9-3 for a cut in December 2025, 9-3 with hawkish dissents in July 2026), and the 2026 leadership transition was contested by two governors. Warsh says he is "not in the forward guidance business", which may raise rate volatility around meetings. Inference (AA): rate hikes do not add oil supply; the risk is lower growth with inflation still above 3%, and a stablecoin framework split across regulators until the Fed and FDIC finalise.
Falsifiers: - Hawkish path fails if the FOMC holds on 2026-10-28 and the statement drops 'Inflation remains elevated' or signals no further firming. - Hawkish path fails if the December 2026 projections lower the year-end 2026 or 2027 median federal funds rate below 4.1%. - Energy pass-through view fails if September PCE (2026-10-29) and October CPI (2026-11-10) show core inflation falling while headline stays high. - Soft-landing case fails if unemployment rises clearly above the SEP's 4.1% median, for example to 4.5% or higher, in the next two employment reports. - Soft-landing case fails if a further FOMC hike is followed by a dissent for a cut or a sharp drop in Beige Book activity. - AA's balance-sheet inference fails if the Desk keeps reserve management purchases paused and reserve balances fall well below $2.9 trillion. - Stablecoin-structure point fails if the Board finalises its GENIUS Act rule before 2027-01-18 with terms matching the OCC's, removing the regulatory gap.
Value accrual gate: Not a crypto asset. Higher policy rates and IORB move income from borrowers to savers and to banks holding reserves. Stablecoin reserve rules may add demand for short-term Treasury bills, which helps the Treasury's funding, not any token's holders. AA does not assume stablecoin growth under Fed rules accrues value to any crypto asset.
What to watch
FOMC decision and Warsh press conference: hike again or pause? (2026-10-27 to 2026-10-28); Source: federalreserve.gov
BEA September PCE inflation, the Fed's preferred gauge. (2026-10-29); Source: bea.gov
H.4.1 weekly balance sheet: do bill purchases resume and reserves hold near $2.96 trillion? (2026-10-29 (weekly)); Source: federalreserve.gov
BLS October CPI. (2026-11-10); Source: bls.gov
Comment deadline on the Board's GENIUS Act proposal (R-1899). (2026-11-30); Source: federalregister.gov
FOMC meeting with new Summary of Economic Projections. (2026-12-08 to 2026-12-09); Source: federalreserve.gov
GENIUS Act and OCC final rule take effect; Fed rule status for Board-supervised issuers. (2027-01-18); Source: occ.gov
Fed final GENIUS Act rule and any Board statements or dissents on it. (no scheduled date); speculative, no scheduled source
First 2027 FOMC meeting (tentative). (2027-01-26 to 2027-01-27); Source: federalreserve.gov
AA inference
Inference (AA): In the graph this node is the main source of dollar price-of-money and liquidity signals, and in 2026 both channels are tightening less cleanly than the headline suggests. The rate channel is clearly hawkish: an energy supply shock has kept headline inflation at 3.4%-3.7% (PCE, CPI) while core CPI is lower, and the committee has chosen to lean against it rather than look through it. The quantity channel is mixed: the Fed is again adding Treasury bills to keep reserves ample, which supports front-end funding even as the policy rate rises. The mechanism to watch is whether energy pass-through reaches core prices and wages; if it does, the median path of another hike likely holds, and if payroll weakness spreads first, the committee's split could reopen. The Fed's stablecoin rule matters more for structure than for macro: it decides how bank-affiliated issuers back coins, which in turn feeds Treasury bill demand.
Sources
Federal Reserve: the Federal Reserve Act of 1913 gave the Fed responsibility for monetary policy; the FOMC has twelve members (the seven Board governors, the New York Fed president and four of the other eleven Reserve Bank presidents on one-year rotations), meets eight times a year and is responsible for open market operations, while the Board handles the discount rate and reserve requirements. (Source: federalreserve.gov, accessed 2026-10-22)
FOMC statement, 16 September 2026: target range for the federal funds rate raised by 1/4 point to 3-3/4 to 4 percent, vote 12-0; 'Inflation remains elevated'; 'Job gains have kept pace with the workforce, and the unemployment rate has changed little'; economic activity 'expanding at a solid pace'; the Committee continues 'maintaining ample reserves in the banking system'. (Source: federalreserve.gov, accessed 2026-10-22)
Implementation note, 16 September 2026 (effective 17 September): interest on reserve balances 3.90%; overnight reverse repo offering rate 3.75% with a $160 billion per-counterparty daily limit; standing overnight repo minimum bid 4.0%; primary credit rate raised to 4.0%; Treasury principal rolled over at auction, agency principal reinvested in Treasury bills, and bill purchases 'when appropriate' to keep reserves ample. (Source: federalreserve.gov, accessed 2026-10-22)
Chairman Warsh's press conference, 16 September 2026: the 12-month change in total PCE prices 'likely was around 3.6 percent in August' (staff estimate before BEA's release); unemployment 'around 4.1 percent'; 'I'm not in the forward guidance business'; no mention of stablecoins. (Source: federalreserve.gov, accessed 2026-10-22)
Summary of Economic Projections, 16 September 2026 (FORECAST): medians for 2026 of real GDP 2.3%, unemployment 4.1%, PCE inflation 3.7%, core PCE 3.4% and a federal funds rate of 4.1%; 2027 federal funds 4.1%, 2028 3.9%, longer run 3.2%. For end-2026, 4 participants wrote 4.375%, 12 wrote 4.125% and 2 wrote 3.875%. (Source: federalreserve.gov, accessed 2026-10-22)
FOMC minutes of 15-16 September 2026 (released 7 October): voters were Warsh, Williams, Barr, Bowman, Cook, Hammack, Jefferson, Kashkari, Logan, Paulson, Powell and Waller; most participants judged another increase 'would likely be appropriate by year end'; staff attributed higher inflation partly to higher energy and input costs from geopolitical developments; the Desk had paused reserve management purchases, whose pace 'was not on a preset course'. (Source: federalreserve.gov, accessed 2026-10-22)
FOMC statement, 29 July 2026: target range held at 3-1/2 to 3-3/4 percent, vote 9-3; Hammack, Kashkari and Logan dissented in favour of a 1/4 point increase; inflation elevated partly because of supply shocks, notably in energy. (Source: federalreserve.gov, accessed 2026-10-22)
FOMC statement, 17 June 2026: target range held at 3-1/2 to 3-3/4 percent, vote 12-0; energy named among sectors where supply shocks pushed prices up. (Source: federalreserve.gov, accessed 2026-10-22)
FOMC statement, 10 December 2025: target range cut 1/4 point to 3-1/2 to 3-3/4 percent, vote 9-3 (Miran preferred a 1/2 point cut; Goolsbee and Schmid preferred no change); reserves judged to have fallen to ample levels, with purchases of shorter-term Treasury securities to begin as needed. (Source: federalreserve.gov, accessed 2026-10-22)
Federal Reserve, 22 May 2026: Kevin Warsh took the oath as Chairman and Board member; nominated 4 March 2026, confirmed by the Senate as a member on 12 May and as Chairman on 13 May; chair term ends 21 May 2030 and Board term 31 January 2040; the FOMC unanimously selected him as its chair. (Source: federalreserve.gov, accessed 2026-10-22)
Federal Reserve Board membership record: Jerome Powell's term as Chairman ran 5 February 2018 to 22 May 2026 and he remains a member; Stephen Miran resigned 21 May 2026. (Source: federalreserve.gov, accessed 2026-10-22)
Board of Governors, page dated 22 May 2026: Kevin Warsh (Chairman), Philip Jefferson (Vice Chair), Michelle Bowman (Vice Chair for Supervision), Michael Barr, Lisa Cook, Jerome Powell and Christopher Waller. (Source: federalreserve.gov, accessed 2026-10-22)
Bowman and Miran statement, 15 May 2026: they opposed designating Powell chair pro tempore without a time limit, calling the gap between Powell's chair term and Warsh's swearing-in 'a unique situation unlike any historical precedent'. (Source: federalreserve.gov, accessed 2026-10-22)
H.4.1, released 22 October 2026 (week ended 21 October, weekly averages, millions of dollars): Reserve Bank credit 6,706,861 (+161,908 on the year); securities held outright 6,470,860; US Treasury securities 4,571,248 (+374,817); mortgage-backed securities 1,897,265 (-187,277); reserve balances 2,962,607; reverse repos 327,238; Treasury General Account 952,002; currency in circulation 2,486,258. Consolidated total assets on Wednesday 21 October: 6,753,604. (Source: federalreserve.gov, accessed 2026-10-22)
Federal Reserve Board, 24 September 2026: two GENIUS Act proposals for Board-supervised payment stablecoin issuers, one on reserves (full backing with permissible assets such as short-term Treasury bills), standardised capital, risk management and custody, and one on the application process for Board-supervised banks. (Source: federalreserve.gov, accessed 2026-10-22)
Federal Register, 29 September 2026 (91 FR 61580, Docket R-1899, RIN 7100-AH29): the Board's proposed rule covers subsidiaries of insured state member banks and certain uninsured state-chartered depository institutions; adds a tying prohibition applying to all permitted payment stablecoin issuers; indexes dollar thresholds to nominal GDP growth; comments due 30 November 2026. (Source: federalregister.gov, accessed 2026-10-22)
Governor Barr, 24 September 2026: supports the stablecoin proposal as 'a step in the right direction' but objects to a provision limiting anti-money-laundering supervisory action to 'significant or systemic' deficiencies; 'Stablecoins will only be stable if they can be reliably and promptly redeemed at par in a range of conditions.' (Source: federalreserve.gov, accessed 2026-10-22)
OCC, 21 October 2026: final rule implementing the GENIUS Act for OCC-supervised issuers; the rule and the Act take effect 18 January 2027; Bank Secrecy Act, anti-money-laundering and sanctions rules to follow separately with Treasury. (Source: occ.gov, accessed 2026-10-22)
Governor Waller, 8 October 2026 (Istanbul): core PCE inflation was 3 percent in the 12 months to August; 'I anticipate additional hikes to support a timelier return of inflation to our 2 percent goal'; hikes need not come at consecutive meetings; links stalled disinflation partly to the Middle East conflict lifting energy prices. (Source: federalreserve.gov, accessed 2026-10-22)
Beige Book, 14 October 2026: 9 of 12 Districts reported growth and 3 no change; all 12 reported price growth; 'Higher oil prices permeated all District reports'; fuel surcharges passing higher diesel costs along supply chains. (Source: federalreserve.gov, accessed 2026-10-22)
BLS, 14 October 2026: CPI rose 0.6% in September (seasonally adjusted) and 3.7% over 12 months; CPI less food and energy up 2.6% over 12 months; gasoline up 34.2% on the year; October CPI due 10 November 2026. (Source: bls.gov, accessed 2026-10-22)
BLS, 2 October 2026: nonfarm payrolls +29,000 in September; unemployment rate 4.2%; average hourly earnings up 3.0% over 12 months; July and August revised down a combined 60,000 (July now -10,000). (Source: bls.gov, accessed 2026-10-22)
BEA, 30 September 2026: PCE price index up 0.3% in August and 3.4% from a year earlier; core PCE up 0.2% and 3.0%; September data due 29 October 2026. (Source: bea.gov, accessed 2026-10-22)
Federal Reserve calendar: remaining 2026 FOMC meetings are 27-28 October (press conference 28 October) and 8-9 December (with projections); 2027 meetings tentatively begin 26-27 January. (Source: federalreserve.gov, accessed 2026-10-22)