Anticipating A Federal Reserve Interest Rate Hike on This 34th Anniversary of Britain’s Black Wednesday
September 16, 2026
The Federal Reserve has not raised its targeted interest rate since September 2023, but financial markets are placing very high odds on that streak ending three hours from now. Coincidentally, this likely directional reversal comes on the 34th anniversary of what arguably was one of the most memorable currency market events of the floating dollar rate era, September 16, 1992 when the British pound under fierce selling pressure from hedge funds left the European Exchange Rate Mechanism ending any chance of sterling being part of the euro bloc. At that time, sterling was trading at $1.90, 41% above its current level, and British inflation of roughly 3.6% was about a half percentage point above the 3.1% year-on-year rate reported today for last month.
Today’s Federal Reserve announcement at 14:00 EDT (18:00 GMT) will be accompanied by updated macroeconomic forecasts and followed by Chairman Warsh’s press conference a half hour later. Investors want the Fed to be more pro-active in combatting U.S. inflation, and long-term interest rates have eased back from this week’s highs as expectations have solidified of a highly probable rise in the federal funds rate to a range of 3.75-4.00%. The 10-year U.S. Treasury yield dropped four basis points overnight and at 4.96% is eight bps lower than this week’s crest of 5.04%, which had been its greatest elevation since July 2007 just weeks prior to the onset of that decade’s financial crisis. In the present, the 30-year fixed U.S. mortgage rate last week rose a dozen basis points and at 6.97% was its highest in sixteen months. In other economies today, ten-year sovereign deb yields settled back eight basis points in the U.K., five bps in Australia and Japan, three bps in Italy and Spain, and two bps in Switzerland and Germany.
Typical of FOMC announcement days, currency markets show little net movement prior to that awaited moment. The dollar’s only significant change is a 0.4% rise against the South Korean won. South Korea’s Kospi equity index closed up 1.4%, while share prices in Japan, China and Taiwan each closed 0.7% higher. European stock markets have recovered around a half percent. Three of the main U.S. stock market indices are 0.3-0.7% firmer, while the DOW is flat.
The Brent and WTI price measures of crude oil have each shed around 2%, while gold and silver are up about 1%.
U.S. data reports today feature import/export prices and retail sales:
- Retail sales climbed by a greater-than-forecast 1.2% in August, their biggest monthly advance in 5 months. This lifted the year-on-year growth 6.0% from 5.0% in the previous month.
- Back-to-back 0.3% declines in import prices during June and July were reversed by a 0.7% increase last month, and that lifted U.S. import price inflation to 7.0%, almost as high as June’s 4-year peak of 7.1%. Interestingly, fuel costs were not the driver of August’s reacceleration, instead dipping 0.1% versus July. Non-fuel import prices rose 0.8%.
- A 0.6% monthly rise in export prices lifted their 12-month rate of increase to 8.6%.
- The National Association of Homebuilders’ monthly housing market index fell to a one-year low this month.
Industrial production in Euroland slid 0.1% for a second straight month in July and were unchanged from a year earlier. The latest three month-over-three month change was a rise of 0.4%, but May-July output was still 0.1% below the year-earlier level. A second euro area report revised hourly labor costs marginally higher to a year-on-year 3.1% in 2Q 2026.
Japan’s customs clearance trade balance in August, a deficit of 1.106 trillion yen not seasonally adjusted, was pretty much aligned with forecasts but 3.75 times wider than a year earlier. The seasonally adjusted deficit widened 30% to JPY 840 billion from JPY 681 billion in July. Meanwhile, Japanese core domestic machinery orders in fell 3.7% in July but were 11.2% above the number in July 2025.
The aforementioned 3.1% British consumer price inflation in August represents a 5-month high. Producer output price inflation of 3.7% marked a 3-month high, and producer input price inflation of 6.1% was a 2-month high.
Italian consumer price inflation was confirmed unrevised from the preliminary estimate of 3.3%, a 35-month high.
South African retail sales surged 2.5% in July, most in 38 months, and tripled the year-on-year advance to 3.4%.
The Central Bank of Uzbekistan kept its policy rate of 14.0% unchanged. It’s been 14.0% since a 50-basis point hike in March 2025. The 14% level is well above the latest 6.2% reading on consumer price inflation but still above the central bank’s goal of restoring 5.0% by late-2027. According to a statement,
Although inflation continues to trend downward and the economy is showing certain signs of more balanced dynamics, the persistence of certain upside risks to inflation callsfor maintaining current tight monetary conditions. Inflation expectations are declining more slowly than headline inflation, reflecting the continued influence of inflationary inertia on price-setting processes.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Black Wednesday, Central Bank of Uzbekistan, U.K. CPI and PPI, U.S. import prices and retail sales
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