Fed raises rates a quarter point to 3.75%-4% in unanimous vote

The Federal Reserve raised its benchmark interest rate on Wednesday, September 16, 2026, lifting the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent. The Federal Open Market Committee approved the decision by a 12-0 vote, according to the statement released by the Fed at 2:00 p.m. EDT.

What the Fed said

The statement was brief. It said economic activity "is expanding at a solid pace" and that "while uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient." It added that productivity growth is strong, capital investment is robust, job gains have kept pace with the workforce and the unemployment rate has changed little.

On prices, the committee was direct: "Inflation remains elevated. Today's policy action will support a timelier return to the Committee's 2 percent goal. The Committee will deliver price stability."

The Fed also said it is continuing its policy of maintaining ample reserves in the banking system.

Projections point to another hike

According to a summary of the decision published by Chase, the median projection in the Fed's September dot plot puts the federal funds rate at 4.1% at the end of 2026 and 4.1% at the end of 2027, then 3.9% in 2028, 3.6% in 2029 and 3.2% in the longer run.

Chase reported that 16 of the 18 committee participants expect at least one more 25-basis-point increase by the end of 2026, and that four participants see two additional hikes as possible.

Warsh on inflation

At his press conference, Fed Chair Kevin Warsh focused on inflation. "The plain fact is that inflation is too high, and has been for too long," he said, according to Chase. He added: "This summer's inflation readings do not tell me that underlying trends have meaningfully improved."

The backdrop, as summarized by Chase, included August consumer price inflation of 3.4% year over year, with a 0.4% monthly increase that was the largest in four months. Unemployment held at 4.1% in August, when the economy added 162,000 jobs. Crude oil had crossed $100 a barrel and diesel had surged to records above $6 a gallon as a result of the Iran conflict, Chase noted.

Chase reported that U.S. stocks declined modestly after the press conference as investors weighed signals that inflation could persist and require restrictive policy for longer.

Why it matters

The federal funds rate is the Fed's main policy tool, and this was a move to tighten, not ease. The statement makes clear that returning inflation to the 2 percent goal is the priority, and the median projection reported by Chase points to further tightening this year rather than relief. Chase also noted that markets processed the decision as a sign that restrictive policy could last longer, with energy prices elevated because of the Iran conflict.

Sources

This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.