--- title: No Tricks, No Treats From The Fed description: With the FOMC meeting this week, attention is turning to the outlook for monetary policy. What should investors expect, and what might it mean for the economy and markets? image: https://info.glenmede.com/hubfs/GLM%20Assets/IS%20Brief%20Bull%20Bear.jpg --- [![GLENMEDE](https://info.glenmede.com/hubfs/raw_assets/public/Glenmede_September2023/images/dark-logo.svg "GLENMEDE")](https://www.glenmede.com/) - [About Us](https://www.glenmede.com/about-us/) - [Who We Are](https://www.glenmede.com/about-us/#who-we-are) - [Our History](https://www.glenmede.com/about-us/#our-history) - [The Board](https://www.glenmede.com/about-us/#the-board) - [Our People](https://www.glenmede.com/about-us/#our-leadership) - [Careers](https://www.glenmede.com/careers/) - A True Partnership - [Individuals & Families](https://www.glenmede.com/private-wealth-management/high-net-worth-individuals-and-families/) - [Family Office Services](https://www.glenmede.com/private-wealth-management/family-office-services/) - [Foundations](https://www.glenmede.com/endowments-foundations/foundation-investment-management/) - [Sustainable & Impact Investing](https://www.glenmede.com/sustainable-impact-overview/) - [Endowments](https://www.glenmede.com/endowments-foundations/endowment-foundation-management/) - [Financial Intermediaries](https://www.glenmedeim.com/) [![Contact Us](https://no-cache.hubspot.com/cta/default/23579600/c4c39f23-46ff-492e-9f41-770fb4a0aeb5.png)](https://cta-redirect.hubspot.com/cta/redirect/23579600/c4c39f23-46ff-492e-9f41-770fb4a0aeb5) - [About Us](https://www.glenmede.com/about-us/) - [Who We Are](https://www.glenmede.com/about-us/#who-we-are) - [Our History](https://www.glenmede.com/about-us/#our-history) - [The Board](https://www.glenmede.com/about-us/#the-board) - [Our People](https://www.glenmede.com/about-us/#our-leadership) - [Careers](https://www.glenmede.com/careers/) - A True Partnership - [Individuals & Families](https://www.glenmede.com/private-wealth-management/high-net-worth-individuals-and-families/) - [Family Office Services](https://www.glenmede.com/private-wealth-management/family-office-services/) - [Foundations](https://www.glenmede.com/endowments-foundations/foundation-investment-management/) - [Sustainable & Impact Investing](https://www.glenmede.com/sustainable-impact-overview/) - [Endowments](https://www.glenmede.com/endowments-foundations/endowment-foundation-management/) - [Financial Intermediaries](https://www.glenmedeim.com/) [![Contact Us](https://no-cache.hubspot.com/cta/default/23579600/c4c39f23-46ff-492e-9f41-770fb4a0aeb5.png)](https://cta-redirect.hubspot.com/cta/redirect/23579600/c4c39f23-46ff-492e-9f41-770fb4a0aeb5) #### Contact Us # Investment Strategy Brief   |   October 25, 2026 No Tricks, No Treats From the Fed   ![IS Brief Bull Bear](https://info.glenmede.com/hs-fs/hubfs/GLM%20Assets/IS%20Brief%20Bull%20Bear.jpg?width=550&height=314&name=IS%20Brief%20Bull%20Bear.jpg "IS Brief Bull Bear") ### Executive Summary - The Fed faces a resilient labor market and inflation that remains stubbornly above its 2% target. - Recent inflation data have done little to convince the Fed that price pressures are fully contained. - Markets expect the Fed to hold rates steady in October, while still anticipating further tightening in December. - Higher rates have tightened financial conditions on the margin, but financial stress has not yet followed. - The Fed is likely to remain patient as it balances persistent inflation against a resilient economic backdrop. ### The Fed faces a resilient labor market and inflation that remains stubbornly above its 2% target ![IS Brief 2026-10-26 Chart 1](https://info.glenmede.com/hs-fs/hubfs/IS%20Brief%202026-10-26%20Chart%201.png?width=1000&height=486&name=IS%20Brief%202026-10-26%20Chart%201.png "IS Brief 2026-10-26 Chart 1") Shown on the left is the U.S. unemployment rate for persons ages 16 years and over in blue and a range estimate of the natural rate of unemployment with a Glenmede-defined buffer in gray, which is the baseline level of joblessness estimated by Glenmede to persist in a well-functioning economy due to frictional and structural factors. Shown on the right are year-over-year changes in the U.S. Consumer Price Index (CPI), with headline CPI shown in blue and core CPI shown in green. Headline CPI reflects changes in prices across all goods and services, while core CPI excludes food and energy prices to measure underlying inflation trends. The gray band represents the Federal Reserve’s target range consistent with its price stability objective. - As the Fed evaluates progress toward its dual mandate, labor market and inflation data remain central to the policy outlook. - The unemployment rate remains at levels consistent with a healthy labor market with normal frictions, suggesting employment conditions remain relatively healthy. - Meanwhile, inflation has remained above the Fed's 2% target, highlighting persistent price pressures across key categories. ### **Recent inflation data have done little to convince the Fed that price pressures are fully contained** ![IS Brief 2026-10-26 Chart 2](https://info.glenmede.com/hs-fs/hubfs/IS%20Brief%202026-10-26%20Chart%202.png?width=1100&height=558&name=IS%20Brief%202026-10-26%20Chart%202.png "IS Brief 2026-10-26 Chart 2") Shown are the year-over-year changes in select U.S. Consumer Price Index (CPI) components. Goods (ex-Food & Energy) is represented by the commodities component (excluding food & energy). Food & Energy is represented by the food & energy subcomponents. Services (ex-Shelter) is represented by Services Less Rent of Shelter. Shelter is represented by Rent of Shelter. CPI measures the price of a basket of goods and services consumed by U.S. households. The gray band represents the Federal Reserve’s target range consistent with its price stability objective. - After briefly moderating earlier this year, food and energy inflation has reaccelerated alongside rising oil prices and renewed tensions in the Middle East. While some had feared that higher energy prices would eventually feed through to other core goods, that has yet to play out. - On the other hand, the services half of the consumption basket has shown little convincing progress, remaining above levels consistent with the Fed’s 2% target and suggesting interest rates may not yet be restrictive enough to fully restore price stability. ### Markets expect the Fed to hold rates steady in October, while still anticipating further tightening in December ![IS Brief 2026-10-26 Chart 3](https://info.glenmede.com/hs-fs/hubfs/IS%20Brief%202026-10-26%20Chart%203.png?width=1200&height=565&name=IS%20Brief%202026-10-26%20Chart%203.png "IS Brief 2026-10-26 Chart 3") Shown on the left are market-implied probabilities for policy rate outcomes at the October 2026 Federal Open Market Committee (FOMC) meeting, derived from federal funds futures prices. Shown on the right in gray are Glenmede’s range estimates of the neutral federal funds rate over time (i.e., the level of rates that is neither economically stimulative nor restrictive) based on expectations for real interest rates via the Holston-Laubach-Williams model and Glenmede’s inflation expectations. Fed Funds Rate in blue is the target rate midpoint. The dashed blue line represents expectations for the forward path of rates based on fed funds futures pricing. The dashed green line represents expectations for the forward path of rates based on the median respondent in the FOMC's dot plot projections. Projections and expectations are arrived at in good faith, but actual results may differ materially. - Markets overwhelmingly expect the Fed to leave rates unchanged in October, with fed funds futures assigning only a small probability of a rate hike. - For the balance of 2026, both the Fed and markets continue to anticipate a December rate hike. - Thereafter, the Fed's projections suggest rates would then remain on hold in anticipation of further information, while futures markets remain convinced that additional hikes will be needed in 2027. ### **When the fed funds rate breaches the neutral rate, the economy often encounters some difficulty** ![IS Brief 2026-10-26 Chart 4](https://info.glenmede.com/hs-fs/hubfs/IS%20Brief%202026-10-26%20Chart%204.png?width=1000&height=483&name=IS%20Brief%202026-10-26%20Chart%204.png "IS Brief 2026-10-26 Chart 4") Shown in orange are Glenmede’s estimates of the neutral federal funds rate over time (i.e., the level of rates that is neither economically stimulative nor restrictive) based on expectations for real interest rates via the Holston-Laubach-Williams model and Glenmede’s inflation expectations. Fed Funds Rate in blue is the target rate midpoint. The dashed blue line represents expectations for the forward path of rates based on fed funds futures pricing. Shaded areas represent U.S. recessions as defined by the National Bureau of Economic Research. Projections and expectations are arrived at in good faith, but actual results may differ materially. - The neutral rate is the level of the federal funds rate that neither stimulates nor restricts the economy. When the Fed pushes its policy rate above that level, borrowing becomes restrictive, and strain can build in the parts of the economy most sensitive to credit. - Over the past four decades, tightening cycles that took the federal funds rate above neutral have often preceded slowdowns in the economy, as in 1996 and stresses in the financial system, such as the Savings and Loan Crisis, the Global Financial Crisis, and the regional bank collapse. **Higher rates have tightened financial conditions on the margin, but financial stress has not yet followed** ![IS Brief 2026-10-26 Chart 5](https://info.glenmede.com/hs-fs/hubfs/IS%20Brief%202026-10-26%20Chart%205.png?width=1000&height=496&name=IS%20Brief%202026-10-26%20Chart%205.png "IS Brief 2026-10-26 Chart 5") Shown is the St. Louis Fed Financial Stress Index, a weekly measure of stress in U.S. financial markets based on interest rates, yield spreads, and other financial indicators. Values are expressed as standard deviations from normal conditions, with readings above zero indicating above-average financial stress and readings below zero indicating below-average financial stress. Gray shaded regions denote U.S. recessions. - Higher long-term bond yields and a nascent Fed rate hike cycle have contributed to a higher cost of capital that may have its own economic impact, but neither have yet resulted in material stress in the U.S. financial system. - While financial conditions have begun to tighten modestly, they remain consistent with a policy backdrop that may require additional restraint to return inflation sustainably to the Fed’s target. For more in-depth information on this topic, please reach out to your Glenmede Relationship Manager. 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