Fed raises rates to 3.75%-4% and signals one more hike this year
The Federal Reserve lifted its benchmark rate by a quarter point in a unanimous vote, said inflation "remains elevated," and penciled in another increase before the end of 2026.
The Federal Reserve raised interest rates on Wednesday, September 16, lifting the target range for the federal funds rate by a quarter of a percentage point to 3.75% to 4%. The decision by the Federal Open Market Committee was unanimous, 12 to 0.
What the Fed said
In its statement, the committee described the economy as expanding at a solid pace, with resilient spending, strong productivity and robust business investment, and an unemployment rate that has changed little. The reason for the increase was inflation, which the Fed said "remains elevated." The committee said the move "will support a timelier return" to its 2% inflation goal, and added: "The Committee will deliver price stability." It also noted that uncertainty remains high, partly because of geopolitical developments.
What officials expect next
The Fed's quarterly economic projections, released the same day, point to one more increase this year:
| Median projection | End of 2026 | End of 2027 | Longer run | June projection for 2026 |
|---|---|---|---|---|
| Federal funds rate | 4.1% | 4.1% | 3.2% | 3.8% |
| PCE inflation | 3.7% | 2.3% | 2.0% | 3.6% |
| Core PCE inflation | 3.4% | 2.5% | n/a | 3.3% |
| Unemployment rate | 4.1% | 4.1% | 4.2% | 4.3% |
| Real GDP growth | 2.3% | 2.4% | 2.0% | 2.2% |
A median rate of 4.1% at year-end sits above the middle of the new 3.75%-4% range, which implies officials expect to raise rates once more before the end of 2026. In June, their median projection for year-end was 3.8%. Officials also raised their inflation forecasts slightly and lowered their unemployment forecast, a picture of an economy running hot enough that the Fed wants to lean harder against prices.
How markets took it
Treasury yields moved higher over the week. According to the U.S. Treasury's daily yield data, the 2-year yield, which is most sensitive to Fed policy, rose from 4.63% on September 11 to 4.76% on September 18. The 10-year yield ended Friday at 5.01%, up from 4.96% a week earlier. The 30-year yield was little changed at 5.34%.
What it means for you
- Borrowers: rates on credit cards, business lines of credit and other variable-rate debt tend to follow the Fed. What the hike means for business borrowing.
- Home buyers: mortgage rates track longer-term yields. Mortgage rates jumped to 6.95% this week.
- Savers: yields on savings accounts, CDs and Treasury bills tend to rise along with the Fed's rate.
- Traders: the next data points to watch are in our week-ahead for futures traders.
Sources: Federal Reserve FOMC statement and Summary of Economic Projections, September 16, 2026; U.S. Department of the Treasury daily par yield curve rates.
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