The Federal Reserve raised its benchmark rate to 3.75%-4.00% on September 16, 2026, its first increase since July 2023. Inflation remains above the 2% goal, while new Fed projections imply another quarter-point increase could follow before the end of this year.
The Federal Reserve raised the target range for the federal funds rate by 0.25 percentage point on Wednesday, September 16, 2026, to 3.75%-4.00%. The Federal Open Market Committee approved the move unanimously, 12-0, saying inflation remains elevated and the increase is intended to support a timelier return to its 2% inflation goal.
The decision marks the Fed's first rate increase since July 26, 2023, when policymakers raised the federal funds target range to 5.25%-5.50%.
Another 2026 hike remains possible
Updated projections from Fed officials show a median federal funds rate of 4.1% at the end of 2026. With the current target range centered near 3.875%, that projection is consistent with another quarter-point increase this year, although the projections are not a commitment to future action.
The Fed also projects 2026 PCE inflation at 3.7% and core PCE inflation at 3.4%, both above its longer-run 2% objective.
Inflation and consumer spending stay firm
The latest available PCE data show the headline index rose 3.7% in July from a year earlier, while core PCE increased 3.3%. Those readings leave inflation well above the Fed's goal.
Consumer demand also remained resilient. Advance U.S. retail and food-service sales rose 1.2% in August from July and were 6.0% higher than in August 2025.
Higher Fed rates can feed through to borrowing costs on credit cards, auto loans and business financing. Mortgage rates are not set directly by the Fed but can move with Treasury yields and broader interest-rate expectations.
Warsh oversees first rate increase
The September decision is the first rate hike under Fed Chair Kevin Warsh, who took office on May 22, 2026.
The Fed said economic activity continues to expand at a solid pace, with resilient domestic spending, strong productivity growth and robust capital investment. Policymakers will now weigh incoming inflation, employment and broader economic data as they determine whether another rate increase is warranted later in 2026.
