The Federal Reserve's September 2026 decision to raise the federal funds target range by 25 basis points to 3.75%-4.00% marked its first hike in three years, driven by persistently elevated inflation readings near 3.4%-3.7% on a year-over-year PCE basis. Recent softer-than-expected September nonfarm payrolls data showing just 29,000 jobs added, combined with downward revisions and comments from officials including New York Fed President Williams and Vice Chair Jefferson emphasizing the need for more data before further action, have shifted market-implied odds sharply lower for an October move while keeping December expectations elevated around 65-75%. Labor market cooling and moderating wage growth now weigh against rapid additional tightening, though the median dot plot still projects one more hike by year-end. Traders are closely watching the October 27-28 FOMC meeting and subsequent inflation releases for signals on the pace of policy normalization.