Overview
- The Federal Open Market Committee unanimously raised the federal funds rate by 25 basis points to a 3.75%–4.00% target range in a decision released on Wednesday, September 16.
- Updated Fed projections show most officials expect at least one more quarter-point hike this year and that rates will stay elevated into 2027, with the year-end policy path around 4.00%–4.25%.
- Officials and Warsh cited persistent inflation running above the 2% target and a recent jump in oil prices tied to disruptions in the Middle East as key reasons for tightening policy.
- Markets moved quickly after the announcement with the 10-year Treasury yield trading at about or above 5%, equities and rate-sensitive sectors weakening, and traders pricing a high probability of further hikes.
- The move will raise borrowing costs for consumers and businesses through higher mortgage and variable loan rates, could benefit savers over time, and intensifies political scrutiny of the Fed’s independence under President Trump.