As was widely anticipated, the Federal Reserve Open Market Committee (FOMC) increased its target rate by 0.25% at the conclusion of its meeting on September 16. This was the first rate increase in over 3 years, and in reading the tea leaves after the meeting, we should expect another 0.25% increase by the FOMC before the end of the year.
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This is a material change in posture compared to where we started in 2026. At the start of the year, the market expected rate cuts from the FOMC. What happened? Ultimately, it goes back to the Federal Reserve’s “dual mandate” of maximum employment and price stability (defined as a 2% inflation rate). And as we all know, inflation continues to run a little hot.
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With Chair Kevin Warsh now at the helm, FOMC leaves no gray area on where it’s focused. As stated in the official statement at the end of the meeting, “Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.” (Emphasis added).
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In fact, the FOMC’s official statement ( available here ) was only 132 words long, which was half the size of the statement at the September meeting last year.
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So what does that mean for aircraft loan interest rates? Will we see an increase there? If we look back at the 10-Year Treasury rate, the market started pricing in these increases earlier this year, as seen in the graph below, which shows the 10-year from January 1 to September 16. In fact, the 10-year surpassed 5.00% for the first time since before the Great Recession.
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This data means it’s not a question of whether rates will go up because the FOMC increased its rate. In reality, market interest rates have already gone up. The question is where rates will go from here, and that’s where things get a little more fuzzy. It all depends. If the FOMC remains focused on price stability, as suggested in their statement, expect more upward adjustments until they’re comfortable with the inflation rate.
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The FOMC meets two more times this year, at the end of October and in early December. As each meeting occurs, we’ll all have a better understanding of what to expect going forward.
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