Fed raises rates to 3.75%–4.00%, its first increase since July 2023, in a unanimous vote

The Federal Reserve raised interest rates on Wednesday 16 September 2026. The Federal Open Market Committee lifted the target range for the federal funds rate by a quarter of a percentage point to 3.75%–4.00%, in a 12–0 vote.

It was the Fed's first increase since July 2023. The committee cut rates six times between September 2024 and December 2025, most recently to 3.50%–3.75%, and had held there since. Our preview set out what traders were watching.

What the statement said

• Growth: economic activity has been expanding at a solid pace, with resilient domestic spending and strong productivity and investment
• Jobs: job gains have kept pace with the growth of the workforce, and the unemployment rate was described as unchanged
• Inflation: still elevated
• The reason for the move: the committee said the increase will "support a timelier return" to its 2% inflation goal

The new administered rates, from 17 September

• Interest on reserve balances: 3.90%
• Overnight reverse repo offering rate: 3.75%
• Standing overnight repo minimum bid rate: 4.00%
• Primary credit (discount) rate: 4.00%, up a quarter point

Balance sheet policy is unchanged: maturing Treasury securities are rolled over, and principal from agency securities is reinvested in Treasury bills.

The projections: higher for longer

September is one of the four meetings with a Summary of Economic Projections. The median projections, compared with June:

• Federal funds rate, end of 2026: 4.1%, up from 3.8%. That is a quarter point above the middle of the new range, consistent with one more increase this year.
• End of 2027: 4.1%, up from 3.6%. End of 2028: 3.9%, up from 3.4%. The longer-run estimate is 3.2%.
• PCE inflation: 3.7% in 2026 (June: 3.6%) and 2.3% in 2027. Core PCE inflation: 3.4% in 2026 (June: 3.3%).
• Unemployment rate, end of 2026: 4.1%, down from 4.3%.
• Real GDP growth: 2.3% in 2026 (June: 2.2%) and 2.4% in 2027.

The biggest change is in the later years: in June the median official expected rates to fall below 3.5% by 2028, and now expects them to stay near 4%. The Fed's dot plot explained shows how to read these medians.

The data behind the decision

• Consumer prices rose 3.4% in the year to August, and 2.4% excluding food and energy (report)
• Producer prices were 5.4% higher than a year earlier (report)
• Payrolls rose 162,000 in August and unemployment was 4.1% (report)
• Consumers' one-year inflation expectations were 3.6% in the New York Fed's survey (report)
• Oil: Brent crude has traded above $100 a barrel since 3 September (report)

What it means for the dollar

How a currency reacts to a decision depends on what markets expected and on the guidance for later meetings, not only on the move itself (how interest rate decisions move currencies). For rate differentials, the higher projections for 2027 and 2028 matter as much as this month's quarter point.

Two more central banks decide this week: the Bank of England on 17 September (preview) and the Bank of Japan on 18 September (preview). The next FOMC meeting is on 27–28 October, without new projections. Live prices: EUR/USD, USD/JPY, gold and the US 500.