The Federal Reserve’s two-day policy meeting begins today in Washington as a fresh batch of economic data lands on policymakers’ desks: durable goods orders surged 1.8% in September, handily beating the 1.5% consensus. The headline looks like rocket fuel for the hawks — but peel back the transportation orders, and the story shifts. Business investment is cooling. Home prices are still climbing. And the consumer confidence reading due at 10 a.m. could tip the scales in either direction.
The Numbers: Defense and Aircraft Drove the Beat
New orders for manufactured durable goods rose $6.3 billion to $345.4 billion in September, the Census Bureau reported Tuesday. That is the sixth increase in seven months — on paper, a strong showing. But the composition tells a more complicated story.
Transportation equipment orders jumped 4.6%, adding $5.2 billion — nearly the entire headline gain. Within that category, civilian aircraft orders exploded 28.4%, reversing a 0.3% decline in August. A few large Boeing orders can swing the entire durable goods report, and September was one of those months.
Strip out transportation, and orders rose a more modest 0.5% — slightly below the 0.6% forecast. Excluding defense, they surged 2.2%, but even that overstates the picture. Defense capital goods orders fell 1.8%, their third straight monthly decline.
The number that matters most to investors — core capital goods orders, which excludes both defense and aircraft — rose just 0.5%. That is down sharply from 1.6% in August and below the 0.7% consensus. Businesses are still spending on equipment, but the pace is decelerating.
Elsewhere in the report: machinery orders rose 1.2%, computers and electronics gained 0.8%, primary metals added 0.5%, and fabricated metal products increased 0.4%. Shipments bounced back 0.9% after a 0.2% dip in August, while unfilled orders and inventories both ticked up modestly.
Home Prices: Still Rising, Still a Problem for the Fed
The S&P CoreLogic Case-Shiller 20-city home price index rose 2.7% year-over-year in August, accelerating from 2.5% in July and beating the 2.5% consensus. The FHFA house price index painted a similar picture: up 0.3% month-over-month and 2.4% year-over-year.
For the Fed, this is the stubborn part of the inflation equation. Shelter costs — which make up roughly a third of the CPI basket — are heavily influenced by home prices with a long lag. The Case-Shiller acceleration suggests the shelter component of inflation will not roll over quickly, even if goods prices moderate.
Building permits were finalized at 1.398 million in September, essentially flat from August’s 1.403 million and slightly below the 1.4 million consensus. New home sales data and the Richmond Fed manufacturing survey are due at 10 a.m. — both could shift the day’s narrative.
The FOMC Context: Hold Now, Hike Later?
The two-day meeting that starts today is widely expected to end with rates unchanged. Fed funds futures price less than a 10% chance of a quarter-point hike this week, according to CME Group’s FedWatch tool. But nearly 75% of traders expect at least one more hike by year-end — the December meeting is the live one.
The backdrop: CPI rose to 3.7% in September, driven partly by energy costs tied to the Iran conflict. Brent crude was trading near five-month highs last week. The Fed’s preferred gauge — the core PCE deflator — comes out Thursday alongside the first estimate of third-quarter GDP. Both will shape whether the December hike stays on the table.
“Inflation is still the No. 1 problem in the U.S. economy,” Navy Federal Credit Union chief economist Heather Long told CNBC. “For consumers, it means really high borrowing costs for the foreseeable future.” The average credit card APR now sits at 23.96%, according to LendingTree, and 30-year fixed mortgage rates hover near 7.4%.
Bottom Line
Tuesday’s durable goods report gives both sides of the FOMC table something to work with. The headline 1.8% print — and the 2.7% Case-Shiller reading — will embolden the hawks who want to signal more tightening. But the cooling in core capex, the drag from defense orders, and consumer credit stress (average card APR at 24%) arm the doves with evidence that restrictive policy is already biting.
The statement language tomorrow afternoon will be scrutinized for any shift in tone. If the committee drops language about “additional policy firming,” markets will read it as the end of the hiking cycle. If it stays in, December is back in play. Either way, today’s data confirms the economy is not rolling over — but it is not running hot, either. That is exactly the kind of mixed signal that makes FOMC deliberations interesting.
Sources: U.S. Census Bureau Advance Durable Goods Report (Oct 27, 2026); S&P CoreLogic Case-Shiller Home Price Indices (Oct 27, 2026); Federal Housing Finance Agency HPI (Oct 27, 2026); CME FedWatch; CNBC (Oct 26-27, 2026); Trading Economics calendar.