Industrial Output Beat Expectations in September and Import Prices Ran Hot. Warsh Isn’t Rushing to Hike.

U.S. industrial production rose 0.7% in September 2026, speeding up from August, which CNBC’s Steve Liesman reported was revised up to a 0.1% gain. The Federal Reserve put out the figure in its industrial production and capacity utilization report on Friday, October 16, 2026. The Bureau of Labor Statistics released September import prices the same morning, and the two reports point in different directions for the Federal Reserve.

September Output Hit Its Highest Level Since 2018

Industrial production tracks physical output at the country’s factories, mines and utilities. September’s gain came in above expectations and raised the index to 103.95, its highest level since December 2018. Output was up 2.2% from a year earlier.

Steve Liesman said on CNBC that consumer goods production rose 0.7%. Liesman also reported that non-industrial and construction supplies rose 1%. One category went the other way: output of motor vehicles and parts fell 3% in September.

The trend has been going up. The index first went above 103 in July 2026 and has stayed there since. Over the past two years, its low was 99.29 in November 2024.

Capacity Utilization Beat the Forecast

Capacity utilization rose to 76.9% in September, the highest reading since December 2023. Steve Liesman reported the result against a forecast of 76.5%. The measure shows how much of the country’s industrial capacity is in use. A higher reading can mean producers have less spare room to meet demand, which gives them more power to raise prices.

September’s numbers at a glance

Import Prices Were the Week’s Third Inflation Surprise

Liesman reported the import price index rose 1.1% in September. Reuters reported that import prices posted their largest annual gain in more than four years. Liesman said both oil and non-petroleum import prices caused the jump. He called it the third report this week to surprise to the upside on inflation. Earlier in the week, the September consumer price index showed prices up 3.7% from a year earlier, tariff-driven increases that Jim Cramer called a regressive tax on lower-income families. Import prices matter because they feed into what businesses pay for materials and finished goods, and into the prices consumers pay.

Why Warsh’s Calm Response Matters

The Fed raised its target range on September 16, 2026 to 3.75% to 4.00%, according to Federal Reserve data. That reversed part of an easing cycle in which the upper bound had dropped from 4.50% in 2025.

Fed Chairman Kevin Warsh spoke overnight at an IMF meeting in Bangkok. According to Steve Liesman, Warsh said the world had “broadly conformed to our expectations,” which Liesman summed up as things evolving “pretty much as expected.” Liesman explained that this meant the Fed had been projecting one additional rate hike this year. His reading: “Warsh was not surprised by these inflation reports, so no need to push the button on a rate hike in October.” Bloomberg and the Financial Times also reported that Warsh’s comments strengthened market expectations of an October hold.

Markets responded quickly. CNBC reported that market-implied odds of an October hike fell from above 50% before Warsh’s comments to 15% after. That was market pricing at the time of the broadcast. It can shift with each new data release.

Borrowers already face higher long-term rates. Separate from Liesman’s CNBC report, the 10-year Treasury yield stood at 5.19% on October 14, 2026, after closing at 5.31% on October 5, 2026, its highest close since May 2002. Ed Yardeni has read that jump as a sign of a strong economy.

Hawks Still Have a Case for Hiking Now

The debate remains open. Liesman noted that some people disagree with Warsh’s patience and think the Fed ought to be hiking now. Their case rests on this week’s data: three inflation reports in a row came in higher than expected, import costs rose across both energy and non-energy goods, and factories are using more of their capacity than at any point since late 2023. Strong output combined with rising input costs is the kind of mix that can keep inflation sticky.

Where today sits

Import prices are rising faster than in 87% of months since 1983

Prices of goods the U.S. buys from abroad, change from a year earlier, every month since September 1983. The shaded bands hold the middle half and the middle 80% of all 466 readings.

Middle half: −1.5% to 5.1%Middle 80%: −5.6% to 9.1%Median 1.3%

Middle half: −1.5% to 5.1%Middle 80%: −5.6% to 9.1%Median 1.3%

What to Watch Before the October Decision

The October outlook now depends on two things. First, the next inflation releases need to show whether this week’s hot readings were a cluster or the start of a trend. Another upside surprise would weaken the “as expected” framing that Liesman attributed to Warsh. Second, watch the tone of other Fed officials. If policymakers start sounding less patient than the chairman, market pricing for a hike could rise again. Anyone carrying variable-rate debt or holding long-duration bonds should keep a close eye on both signs.