The Fed Raises Rates to 3.75%–4%, Its First Hike Since 2023

The Federal Open Market Committee voted 12–0 on September 16 to raise the federal funds target range by a quarter point, to 3.75 to 4 percent, effective the next day. It is the Fed's first increase since 2023. The range had held at 3.50%–3.75% since late 2025, including at the July meeting, when three members already preferred a hike.

The statement was short. The committee said economic activity is expanding at a solid pace, that domestic spending has stayed resilient despite uncertainty tied partly to geopolitical developments, and that inflation remains elevated. It described the increase as support for a timelier return to its 2 percent goal. Alongside the decision, the Board raised the interest rate it pays on bank reserves to 3.90 percent and the primary credit rate at the discount window to 4.0 percent.

What officials expect next

The quarterly projections released with the decision put the median federal funds rate at 4.1 percent at the end of 2026, up from 3.8 percent in June. The Fed reports the midpoint of its range, so 4.1 percent implies one more quarter-point increase before the year is out. The median stays at 4.1 percent through 2027 and does not fall until 2028, to 3.9 percent. Officials also raised their 2026 inflation projections, to 3.7 percent for PCE inflation and 3.4 percent for core PCE, and lowered their unemployment projection to 4.1 percent.

What moves in your money

Credit cards and HELOCs. Variable rates are usually tied to the prime rate, which banks move in step with the Fed. Expect your card's APR to rise about a quarter point within a billing cycle or two. On a $6,000 balance that is roughly $15 more interest a year, and it stacks with every further increase.

Savings. High-yield savings and money market yields tend to follow the Fed up, often with a lag. Treasury bill yields move first because they price in the next meeting before it happens. Our rates guide and our guide to where to keep an emergency fund cover the options.

Fixed-rate mortgages. These don't follow the Fed directly; they track longer-term Treasury yields and inflation expectations. They have been climbing anyway: Freddie Mac's 30-year average reached 7.03 percent on September 24 (our mortgage report).

Debt you've already locked. Fixed-rate car loans, fixed-rate student loans and existing fixed mortgages don't change.

What to do

Pay down variable-rate balances first, since they are the only debts a hike reprices. If your cash sits in a checking account earning close to nothing, moving it now captures higher yields as they arrive. And watch the calendar: the next decisions come October 28 and December 9, and the December meeting brings new projections. For context on how the committee got here, see our report on the April hold and its four dissents.