The Federal Reserve faces a closely watched rate decision as turmoil in global bond markets raises the stakes of either tightening policy or holding rates steady. Markets price a roughly 76% chance of a quarter-point increase this week after stronger-than-expected employment data and an August pickup in consumer prices, with 50 basis points of additional hikes priced by the end of 2026. A hike would be the first since July 2023 and could reinforce the Fed’s commitment to returning inflation to its 2% target while demonstrating independence amid political pressure to ease policy. Investors caution that a decision to hold rates could push long-term Treasury yields higher if markets demand a larger term premium, the extra compensation for owning longer-dated debt. Inflation has remained above target for more than five years, oil prices have touched $100 a barrel, federal deficits are running near 6.5% of GDP and economic growth remains strong. Some investors therefore see further tightening as necessary to preserve the Fed’s credibility, while others argue that higher rates would hurt housing and other rate-sensitive sectors without sufficiently slowing the parts of the economy driving growth.