On September 16, 2026, the Federal Reserve's Federal Open Market Committee voted unanimously to raise its key interest rate by 25 basis points, bringing the target range to 3.75%-4%. This decision was widely anticipated by the markets, which had priced in a greater than 90% chance of a hike.
The Fed's statement emphasized that inflation remains elevated and that this policy action aims to support a return to the 2% inflation goal. Updated projections indicate that a majority of officials expect at least one more rate hike this year, with some anticipating two.
The Fed has also adjusted its inflation expectations for 2026, now forecasting a headline personal consumption expenditures price index of 3.7% and a core rate of 3.4%. The committee's outlook reflects concerns about persistent inflation, particularly due to rising energy prices and potential inflationary pressures from increased investment in artificial intelligence.
Following the announcement, the S&P 500 rose, and Treasury yields experienced fluctuations, with the 10-year note increasing significantly since late August. Borrowing costs have also risen, exemplified by a 30-year fixed mortgage rate climbing to 7.19%. The Fed's actions and projections suggest a cautious approach to managing inflation while navigating a stabilizing labor market