Fed raises rate to 3.75%-4%, drops supply shocks from inflation language
Officials described the economy as expanding at a solid pace even as inflation stays elevated, and traders had priced in a 95% chance of the move.
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UpdateWednesday, September 16, 2026 at 3:05 PM ET
The rate hike passed the Federal Reserve's committee 12-0. Governor Kevin Warsh said the central bank has removed a dose of accommodation from policy but that financial conditions are not clearly restrictive, adding that the economy has strengthened over the past seven weeks while inflation trends have not improved enough to meet the Fed's test. Officials' projections show 12 members expect rates at 4.1% by the end of 2026, four expect 4.4% and two expect 3.9%. Traders are now betting on two more rate increases this year, beyond the Fed's median projection of one. Deutsche Bank's Matthew Luzzetti said the Fed's patience has run out and expects a quicker return to the 2% inflation target. Th
UpdateWednesday, September 16, 2026 at 2:15 PM ET
The Fed's decision to raise rates a quarter point to 3.75%-4% was unanimous, on a 12-0 vote. Officials' median projection puts rates at 4.1% by the end of 2026, 4.125% in 2027, 3.875% in 2028 and 3.625% in 2029. Twelve members see rates at 4.1% by end-2026, four see 4.4% and two see 3.9%. The Fed also raised its long-run rate forecast to 3.25% from 3.063%.
UpdateWednesday, September 16, 2026 at 2:10 PM ET
The Fed's statement also said productivity growth is strong and capital investment is robust, and it added that the committee will deliver price stability. Officials paired that language with the removal of supply shocks from the inflation section, framing the case for holding a hawkish stance despite pressure from the White House to cut rates.
The Federal Reserve raised its benchmark rate to a range of 3.75% to 4%. Traders had priced in as much as a 95% chance of a quarter point increase ahead of the meeting.
In its statement, the Fed said economic activity is expanding at a solid pace, that domestic spending has been resilient despite elevated uncertainty, and that job gains have kept pace with the workforce. Inflation remains elevated, the Fed said, but it dropped its earlier language attributing that partly to supply shocks.
The move came against a backdrop of political pressure. CEA Chairman Christopher Phelan said a Fed rate hike would be a mistake. Kevin Hassett said Trump and he would respect whatever Warsh decided.
Markets had already been pricing in firmer inflation risk. The 10-year Treasury yield stood near 5% around the time of the meeting, and oil prices rose, with Brent up 0.7% and West Texas Intermediate near $102.12, reviving inflation concerns. By removing supply shocks as an explanation for price pressures, the Fed signalled it now views inflation as more structural and demand-driven, a shift that reinforces expectations for further rate increases. That keeps the path higher in rates intact despite the economy's resilience, and it points to continued pressure on equities and on longer-duration assets.