The Horizon
$130,000. That is what $100,000 in a ten-year Treasury Inflation-Protected Security, bought at last Friday's yield, is worth in 2036, measured in 2026 dollars.
The figure assumes the 2.68% real yield the Federal Reserve's H.15 release recorded for September 18, with coupons reinvested at that same rate. It is a contract rate rather than a forecast, and it now sits well above what the central bank itself expects cash to earn after inflation.
That gap is what last Wednesday really delivered. The Fed raised rates for the first time since 2023, but the projections printed beside the decision moved the long-run math far more than the hike did.
The Event
The Federal Open Market Committee raised the target range for the federal funds rate by a quarter point to 3.75% to 4.00% on Wednesday, September 16. The vote was 12 to 0.
The statement said "inflation remains elevated" and that the move "will support a timelier return to the Committee's 2 percent goal." It was the first increase of Chairman Kevin Warsh's tenure.
The Bureau of Labor Statistics had set the backdrop on September 11. August CPI rose 0.4% on the month and 3.4% over twelve months, with energy up 16.3% and core CPI up 2.4%.
At the press conference, Warsh put twelve-month PCE inflation for August at around 3.6%. On the next move he said, "I'm not in the forward guidance business."
The Summary of Economic Projections carried the larger shift. The median funds rate for the end of 2026 rose to 4.1%, from 3.8% in June.
The 2027 median rose to 4.1% from 3.6%. The longer-run median rose to 3.2% from 3.1%.
Sponsored
Nvidia says without this radical device AI can't scale
Take a look at this…
It's smaller than a fingertip. It's made of glass. And it's about to reshape AI from the ground up.
Jensen Huang, Nvidia's CEO, says this device is shattering the limitations of AI and without it, AI can't scale.
Google Ventures says it's the future of AI compute.
And Sequoia Capital – the firm that backed Anthropic and OpenAI – calls it a "holy grail".
Yet most Americans have never heard of it…
Wall Street insider Jason Bodner – the same man who called Nvidia at $4.50 – says this critical "light-speed" device could be bigger for AI than GPUs… and it's about to launch a whole new wave of AI winners. And to prove it, he's giving away his #1 stock involved with it – for free.
Click here for all the details.
The Path
The first consequence lands in the cash sleeve. H.15 shows the effective funds rate stepping from 3.63% to 3.88% on September 17, and money market funds and brokerage sweeps reprice against that rate within days.
The bill market barely noticed. The six-month bill went from 4.07% on September 14 to 4.13% on September 18, already above the new effective rate.
The second consequence is the one most coverage skipped.
The committee's longer-run medians put the funds rate at 3.2% and PCE inflation at 2.0%. That implies roughly 1.2% as the real return on cash across a full cycle.
The ten-year TIPS yielded 2.68% real on September 18. At 1.2% real, $100,000 compounds to roughly $112,700 of 2026 purchasing power over ten years, against roughly $130,300 at 2.68%.
That is a gap of about $17,600 on every $100,000, assuming both rates hold for the decade. The Fed's own projections are the source for the lower of the two numbers.
The path between here and the longer run matters too. The median funds rate eases from 4.1% in 2027 to 3.9% in 2028 and 3.6% in 2029.
A rolling bill ladder is priced to reset lower each year along that path. A TIPS real yield, once bought, stays fixed to maturity.
The third consequence reaches into real assets and business capital. Freddie Mac put the 30-year fixed mortgage at 6.95% on September 17, up from 6.76% a week earlier and 6.26% a year earlier.
Mortgage pricing tracks the long end, not the funds rate. H.15 put the ten-year Treasury at 4.94% on September 17, roughly two percentage points below that day's mortgage rate.
For a builder financing a rental property or a business purchase, new debt just repriced higher. For one already holding a fixed-rate loan below 6%, the same move raised the value of that cheap liability.
The fourth consequence is tax plumbing. In a taxable brokerage account, the annual inflation adjustment on a TIPS is federally taxable in the year it accrues, even though the cash arrives only at maturity.
Inside an IRA or 401(k), that phantom income does not arise. The 2.68% figure is cleanest as a tax-deferred number, and a builder's account map determines how much of it survives.
The Watch
The first signal lands September 30 at 8:30 a.m., when the Bureau of Economic Analysis publishes August personal income and outlays. That release tests Warsh's estimate of 3.6% PCE inflation and sits alongside the third estimate of second-quarter GDP.
The second arrives October 14, with September CPI from the Bureau of Labor Statistics. The energy line, up 16.3% over the year in August, is the component to hold against the committee's 3.7% median for 2026 PCE inflation.
The third is the October 27 to 28 meeting, which carries no new projections, followed by the December 8 to 9 meeting, which does. The threshold is the 4.1% year-end median: a second hike confirms it, and a pause signals the dots are drifting back.
The Fed's own projections now price cash below the TIPS market for a decade, and the September 30 PCE print is that spread's first dated test.