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Fed Raises Rates, Signals Another Hike Amid Higher Inflation
The Federal Reserve raised interest rates by one quarter of a percentage point.
Higher rates can make borrowing more expensive.
Fed officials said they may raise rates one more time this year.
They expect rates to stay about the same in 2027.
Officials are concerned because prices are still rising faster than they want.
They increased their forecasts for inflation in 2026 and later years.
Energy costs linked to the Middle East war were cited as one source of pressure.
The Fed expects inflation to return to its 2% goal in 2029.
Officials largely kept their forecasts for economic growth and unemployment steady.
The Federal Reserve raised its federal funds target range by 25 basis points to 3.75%-4.00%.
Fed projections indicate one more rate increase this year, followed by steady rates in 2027.
Sixteen of 19 policymakers favored another hike this year, while two expected rates to remain unchanged.
Officials raised their inflation forecasts and now expect the 2% target to be reached in 2029.
Growth and employment projections remained broadly stable, with 2026 GDP growth projected at 2.3% and unemployment at 4.1%.
- Who
- The Federal Reserve and its policymakers, including Chairman Kevin Warsh.
- What
- The Federal Reserve raised its target federal funds rate by 25 basis points and signaled another increase this year.
- Where
- At a Federal Reserve policy meeting; the specific location was not stated.
- When
- The decision was announced Wednesday and published September 16, 2026.
- Why
- Inflation remains above the Federal Reserve's 2% target, with energy costs and other price pressures contributing to concern.
Key facts
- New federal funds target
- 3.75%-4.00%
- Rate increase
- 25 basis points
- Expected additional hikes
- One more increase is projected for this year
- 2026 inflation forecast
- 3.7%, measured by the personal consumption expenditures price index
- Inflation target timing
- Officials expect inflation to return to 2% in 2029
- 2026 GDP growth forecast
- 2.3%, up from the June projection of 2.2%
- Unemployment forecast
- 4.1% through 2029
Sources
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