Federal Reserve raises interest rates to 3.75-4% to combat inflation

The United States Federal Reserve (Fed) announced a unanimous decision to raise interest rates by a quarter of a percentage point on September 16, 2026. This marks the first rate hike since the summer of 2023, bringing the target range for the federal funds rate to 3.75-4%. The decision was reached following a two-day closed-door meeting and was supported by Kevin Warsh, the new central bank governor appointed by President Donald Trump earlier this spring.

The rate increase is aimed at curbing rising inflation, which the Fed now projects will reach 3.7% by the end of the year, an upward revision from its previous June forecast of 3.6%. While financial markets largely anticipated the move, it faced opposition from President Trump, who had previously hoped for lower borrowing costs. According to Reuters, the unanimity of the board’s vote is being interpreted as an acknowledgment of the current administration's inability to effectively manage inflationary pressures through its own policies.

Looking ahead, the Federal Reserve indicated that further monetary tightening is likely necessary. Officials signaled that interest rates may need to rise further to a range of 4-4.25% by the end of 2026 to stabilize the economy.