The Federal Reserve raised its policy rate to a target range of 3.75 to 4.00 percent on September 16, its first increase in three years after two straight years of cuts. The CBOE Volatility Index moved from 15.30 on September 7 to 17.71 on the day of the decision, then fell back to 14.87 by September 21. That five-day round trip tells a more precise story than the headline rate move on its own.
The pattern is not noise. It is the signature of anchoring, the heuristic Kahneman and Tversky described in a 1974 paper in Science. An investor who spent two years anchored to a rates-only-fall narrative does not recalibrate the moment the trend reverses. The first piece of evidence against the anchor gets treated as an outlier rather than a new regime. That is what the September 16 spike shows: a jolt large enough to register, followed by a retreat back toward the anchor rather than a sustained repricing.
Why the Bank of Canada Held While the Fed Moved
The Bank of Canada left its overnight rate at 2.25 percent on September 2, unchanged for a full year and the seventh consecutive hold since its October 2025 cut. Governor Tiff Macklem pointed to two forces working against Canadian growth: the continuing conflict in the Middle East sustaining elevated energy prices, and the collapse of Canada-US trade talks that has produced tariffs running as high as 50 percent on both sides of the border. WTI crude has traded between 85.76 and 102.48 US dollars a barrel since late August, closing at 91.29 on September 22.
For a client whose mental model still runs on 2023 through 2025 logic, that is two central banks that no longer look aligned. The Fed just delivered its first hike in three years while the Bank of Canada is boxed in by tariffs and an energy shock it did not choose. A client anchored to synchronized cutting cycles is the least prepared for a divergence this size to hold into the Bank of Canada next decision on October 28.
The Anchoring Trap Advisors Should Watch For
Anchoring does not only distort how a client reads a single data point. It distorts the reference plan itself: the mortgage renewal budgeted around a falling-rate assumption, the bond ladder duration chosen for a cutting cycle that anchoring research would predict gets defended even after the regime changes. The quick round trip back to 14.87 in the VIX is the market version of the same bias, a shock gets priced, then the old anchor reasserts itself faster than the underlying policy picture has actually moved.
The research is specific about the mechanism: an initial reference point, once set, requires disproportionately strong evidence to dislodge, and investors systematically underadjust even when they know the anchor is arbitrary. A single Fed decision, however large, competes against two years of accumulated anchor. That asymmetry is why naming the anchor directly, rather than only restating the new rate, is what moves a plan before the next data point forces it.
Daily closes on the CBOE Volatility Index across the past month show the spike-and-retreat pattern precisely, moving from a September 7 low near 15 to a September 16 peak of 17.71 before settling back to 14.87 by September 21.
The VIX spiked to 17.71 on the day the Federal Reserve delivered its first rate hike in three years, then retreated to 14.87 within four trading sessions. Source: Cboe Global Markets.