Fed Raises Rates for First Time Since 2023, Signals Another Hike This Year

WASHINGTON, The Federal Reserve raised its benchmark interest rate by a quarter of a percentage point on Sept. 16, the first increase since July 2023, and a majority of policymakers signaled they expect to tighten again before the end of the year.

The Federal Open Market Committee voted 12-0 to lift the federal funds target range to 3.75%-4%, according to a statement released by the Board of Governors. The unanimous vote came after three members had dissented in favor of a hike at the July meeting, where the committee chose to hold.

In its post-meeting statement, the committee said "inflation remains elevated" and that the action would "support a timelier return to the Committee's 2 percent goal."

Fed Chair Kevin Warsh, at a press conference after the decision, said inflation had been "too high ... for too long." He added: "We must be confident that underlying inflation is moving to our objective clearly and at sufficient speed."

Wall Street had priced in better than a 90% chance of a hike going into the meeting, according to reporting by CNBC. That expectation hardened after a strong August jobs report and persistently elevated inflation readings pushed policymakers toward action.

The updated Summary of Economic Projections, released alongside the decision, showed that 16 of 18 participating officials, Warsh does not submit a dot, expected at least one more rate increase this year, with four of those seeing the possibility of two additional hikes. The median projection for year-end 2026 rose to 4.1%, up from 3.8% in June projections, according to Charles Schwab's analysis of the SEP. The 2027 median also moved higher, to 4.1% from 3.6%.

The hike reverses the trajectory set at the Fed's December 2025 meeting, when the committee cut rates to a range of 3.5%-3.75%. Since then, energy prices have driven a fresh wave of price pressures. The FOMC statement cited "geopolitical developments" as a source of elevated uncertainty, though it said domestic spending has remained resilient and productivity growth is strong.

Warsh has declined to submit his own rate projection in the dot plot since taking the chairmanship. At the press conference, he offered limited explicit forward guidance, consistent with a style he has maintained since his first FOMC meeting, according to the Kiplinger live coverage of the session.

Markets moved in conflicting directions after the 2 p.m. announcement. The S&P 500 slipped following the press conference, while Treasury yields extended a run higher that began weeks earlier. The 10-year note has risen roughly a quarter of a percentage point since Warsh spoke at the Fed's Jackson Hole symposium in August, according to CNBC.

The next FOMC meeting is scheduled for late October. With eight of 18 officials pointing to another hike and six favoring a hold, according to CNBC's reading of the dot plot, the outcome of that meeting is not settled. Four officials saw possible cuts ahead in 2027.

Fiscal conditions add another variable. Both chambers of Congress passed a continuing resolution that funds the federal government through Dec. 11, averting a shutdown at the start of the new fiscal year on Oct. 1. The House passed the stopgap 370-48, according to Breaking Defense, which reported the Senate had cleared the measure in August by a 90-6 margin. That bill now awaits President Trump's signature. Full-year FY2027 appropriations remain unresolved, with the House having passed only two of twelve spending bills and the Senate having passed none.

Sources cited:
- Federal Reserve Board, FOMC Statement, Sept. 16, 2026 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm)
- CNBC, Fed rate decision September 2026 (https://www.cnbc.com/2026/09/16/fed-rate-decision-september-2026.html)
- Charles Schwab, Fed Hikes in 12-0 Vote (https://www.schwab.com/learn/story/fomc-meeting)
- Kiplinger, September Fed Meeting: Updates and Commentary (https://www.kiplinger.com/investing/live/fed-meeting-updates-and-commentary-september-2026)
- Breaking Defense, House passes funding stopgap, averting government shutdown in October (https://breakingdefense.com/2026/09/house-passes-funding-stopgap-averting-government-shutdown-in-october/)
- FedTools, Government Shutdown October 2026: Senate Passes CR 90-6 (https://www.fedtools.com/blog/government-shutdown-october-2026)