The Federal Reserve has raised rates again while leaving open the harder question: whether inflation will ease without much more tightening. On 16 September 2026, policymakers unanimously increased the federal funds target range by a quarter percentage point to 3.75% to 4%, citing an economy expanding at a solid pace and inflation still above the Fed’s 2% goal.
The increase followed several rate cuts that began in 2024 and brought the target range to 3.50% to 3.75% by the end of 2025. The policy sequence also included three years without an increase before rate hikes restarted.
Borrowing costs have already risen for households. The average U.S. 30-year fixed mortgage reached 6.95% in the week ending Sept. 17, 2026, its highest level since January 2025.
The divide inside the Fed has been visible before. At its meeting on 18 September 2024, the Federal Open Market Committee released its statement at 2:00 p.m. EDT after voting 11-1 to lower the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent.
Michelle Bowman, a Federal Reserve governor, cast the sole dissent. She preferred a 1/4 percentage point reduction.
Officials supported that September rate decision for differing reasons. Some wanted insurance against inflation, while others judged that the economy needed higher rates. The Summary of Economic Projections put the median federal funds rate at 4.4 percent at the end of 2024 and 3.4 percent at the end of 2025.
Jerome Powell, the Federal Reserve chair, held a press conference after the statement.
Current conditions have made agreement no easier. September’s meeting left most officials unconvinced that price pressures had fallen enough, as strong spending and persistent price increases outweighed the strain of expensive borrowing on parts of the economy.
Alberto Musalem, president of the St. Louis Fed, said this week that further tightening may be needed if those pressures persist, though he said future decisions would depend on incoming economic conditions. At Jackson Hole on August 28, Warsh said inflation was above the 2% target. He said that without confidence it was moving to target “clearly and at sufficient speed,” then “we have work to do.”
The Fed’s inflation target is 2%. The remaining uncertainty is how policymakers will judge whether price growth is slowing quickly enough to hold rates steady, or whether further increases are needed.
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