how much did the fed raise interest rates? The Federal Reserve raised its benchmark federal funds target range by 0.25 percentage point, or 25 basis points, at its latest policy meeting on September 16, 2026. The target range moved from 3.50%-3.75% to 3.75%-4.00%, with the new range taking effect September 17.
The decision marked the Fed’s first interest-rate increase since 2023 after the central bank had kept its policy rate unchanged through much of 2026. The latest move puts the federal funds rate at a midpoint of about 3.875%.
How Much Did the Fed Raise Interest Rates?
The latest increase was 25 basis points, which is equal to 0.25 percentage point.
Before the September 2026 meeting, the federal funds target range was:
- Previous range: 3.50%-3.75%
- Increase: 0.25 percentage point
- New range: 3.75%-4.00%
- Increase in basis points: 25 basis points
- Effective date: September 17, 2026
The Federal Open Market Committee approved the decision unanimously, with a 12-0 vote. The Fed said the action was intended to support its dual mandate while inflation remained elevated.
A quarter-point move is considerably smaller than some of the increases seen during the Fed’s aggressive inflation-fighting campaign in 2022. At that time, the central bank used several increases of 50 and 75 basis points. The latest decision therefore represents a relatively measured adjustment in comparison with the largest moves of that earlier tightening cycle.
Why Did the Fed Raise Rates by 0.25%?
The main issue highlighted by the Federal Reserve was persistent inflation.
In its September 16 statement, the central bank said economic activity was expanding at a solid pace, domestic spending remained resilient, productivity growth was strong, and capital investment was robust. At the same time, inflation remained elevated.
That combination matters for monetary policy.
When inflation remains above the Fed’s 2% longer-run objective, policymakers can use higher interest rates to make borrowing more expensive and financial conditions tighter. The goal is to moderate demand and reduce inflationary pressure over time.
The September decision therefore represents a change from the Fed’s rate strategy earlier in 2026. Instead of maintaining the previous range, policymakers opted for a quarter-point increase as inflation remained a concern.
The central bank specifically said the latest action would support a more timely return of inflation to its 2% goal.
What Was the Fed Rate Before the Latest Increase?
The Fed entered the September 2026 meeting with the federal funds target range at 3.50%-3.75%.
That range had been established after the Fed cut rates by 25 basis points in December 2025. The December decision lowered the target from 3.75%-4.00% to 3.50%-3.75%.
The central bank then maintained that range through the 2026 meetings leading up to September. Its March 2026 implementation decision, for example, continued to target a federal funds range of 3.50%-3.75%.
The September hike consequently reversed the previous 25-basis-point reduction and moved the policy range back to 3.75%-4.00%.
Why 25 Basis Points Matters
A 25-basis-point rate increase may sound small, but the federal funds rate influences a broad range of short-term borrowing costs.
The federal funds rate is the rate banks charge one another for overnight borrowing of reserve balances. The Federal Reserve does not directly set every consumer or business interest rate, but changes in its benchmark rate can influence other rates throughout the financial system.
When the Fed raises its target rate, the effects can eventually show up in areas such as:
- Credit card interest rates
- Variable-rate loans
- Auto financing
- Personal loans
- Business borrowing
- Some deposit and savings rates
- Other short-term financial products
The exact effect varies by product, lender and market conditions. Mortgage rates, for example, are not directly set by the federal funds rate and can move based on longer-term Treasury yields and other market factors.
How the Latest Hike Compares With Earlier Fed Increases
The September 2026 decision is much smaller than the largest rate increases used during the 2022 inflation surge.
The Fed began raising rates in March 2022, when the federal funds target range was only 0.25%-0.50%. Several subsequent meetings produced unusually large increases, including multiple 75-basis-point moves.
By July 2023, the target range had reached 5.25%-5.50%, following a 25-basis-point increase at that meeting. The Fed then held the range at that level until it began cutting rates in 2024.
The September 2026 increase is therefore part of a very different stage of the monetary-policy cycle.
Rather than moving from near-zero rates toward restrictive territory, the Fed is now adjusting a policy rate that was already considerably higher than its pre-2022 level.
How Much Has the Fed Changed Rates Since 2022?
Looking at the broader period helps put the latest 25-basis-point hike into perspective.
The federal funds target range rose dramatically between March 2022 and July 2023. It went from 0.25%-0.50% to 5.25%-5.50%, an increase of 5 percentage points in the target-range boundaries.
The Fed subsequently shifted toward rate cuts. In September 2024, it reduced the target range by 50 basis points to 4.75%-5.00%. Further quarter-point cuts followed in November and December 2024.
In 2025, the Fed’s rate cuts continued. Its September, October and December decisions each reduced the target range by 25 basis points, leaving the federal funds rate at 3.50%-3.75% at the end of the year.
The September 2026 increase brought the target range back to 3.75%-4.00%.
What Does the Fed’s Latest Rate Increase Mean for Borrowers?
For borrowers with variable-rate debt, a higher federal funds rate can put upward pressure on borrowing costs.
Credit cards are particularly relevant because many credit card annual percentage rates are variable. When the benchmark environment rises, lenders can adjust rates, although the timing and size of changes depend on individual card agreements and other factors.
Variable-rate loans can also become more expensive.
Consumers considering new borrowing may therefore encounter higher financing costs than they would have under a lower-rate environment. Existing fixed-rate loans generally do not automatically become more expensive simply because the Fed raises its benchmark rate.
The same distinction matters for mortgages. A fixed-rate mortgage does not automatically reset when the Federal Reserve changes the federal funds target range. Instead, mortgage rates respond to broader financial-market conditions, including movements in longer-term Treasury yields.
What Does the Rate Hike Mean for Savers?
Higher rates can also benefit some savers.
Banks and other financial institutions may increase yields on certain savings accounts, money-market products and certificates of deposit when market interest rates rise. The effect is not necessarily immediate or identical across institutions.
The latest rate decision therefore has different implications depending on whether someone is borrowing, saving or doing both.
For people carrying variable-rate debt, a higher benchmark environment can increase financing costs. For people holding interest-bearing deposits, higher rates can provide an opportunity to earn more interest, although individual account yields depend on the institution and product.
The Fed’s Latest Economic Projections
The September meeting also included updated economic projections.
The Fed’s September projections put the median federal funds rate at 4.1% at the end of 2026, compared with a 3.8% median projection in June. The projections therefore indicated that policymakers, on balance, saw room for another increase before the end of the year.
That projection should not be interpreted as a guarantee of a future rate move.
The Federal Reserve makes decisions meeting by meeting, based on incoming economic information and its assessment of risks. Individual policymakers’ projections represent their assessments of appropriate monetary policy rather than promises about future decisions.
The September projections also showed a median 2026 PCE inflation projection of 3.7%, above the Fed’s 2% longer-run objective. The median unemployment-rate projection for 2026 was 4.1%.
These projections help explain why policymakers continued to focus on inflation even as the economy remained resilient.
Was This the First Fed Rate Hike in Three Years?
Yes.
The September 2026 increase was the Fed’s first federal funds rate hike since July 2023. At the July 2023 meeting, the FOMC raised the target range by 25 basis points to 5.25%-5.50%.
The Fed then maintained that elevated range through the remainder of 2023 before beginning a different phase of policy in 2024.
The September 2026 move therefore stands out because it marks a return to rate increases after a lengthy period dominated by either rate cuts or unchanged policy.
What Is the New Federal Funds Rate?
After the latest decision, the official target range is 3.75%-4.00%.
The midpoint of that range is approximately 3.875%. The effective federal funds rate can trade within the target range and is influenced by money-market conditions and the Fed’s implementation tools.
The Federal Reserve also adjusted related administered rates as part of its policy implementation. The interest rate paid on reserve balances was raised to 3.90%, while the primary credit rate was increased by 25 basis points to 4.00%, with the changes effective September 17.
These operational changes help the Fed maintain control over short-term interest rates as it implements its monetary-policy stance.
What Happens Next With Interest Rates?
The next direction for rates will depend on incoming economic data and the Fed’s assessment of inflation, employment and broader financial conditions.
The September projections are notable because policymakers’ median year-end projection points to a federal funds rate of 4.1%, suggesting that another 25-basis-point increase was included in the central tendency of policymakers’ individual projections.
However, projections are not decisions.
The Fed can change its policy outlook if inflation falls faster than expected, economic growth weakens, labor-market conditions deteriorate, or other significant developments alter the balance of risks.
For consumers and businesses, the most important takeaway is that the latest rate increase does not determine every interest rate in the economy. Different financial products respond differently and at different speeds.
Bottom Line on How Much the Fed Raised Interest Rates
The answer to how much did the fed raise interest rates is straightforward: the Federal Reserve raised its benchmark federal funds target range by 25 basis points, or 0.25 percentage point, at its September 2026 meeting.
The target range increased from 3.50%-3.75% to 3.75%-4.00%, effective September 17, 2026. It was the first Fed rate increase since July 2023 and came as inflation remained elevated.
The latest move also leaves the federal funds rate below its 2023 peak but significantly above the near-zero levels seen before the 2022 tightening cycle. With policymakers’ latest projections pointing to a 4.1% median federal funds rate at the end of 2026, future decisions will continue to depend on the economic data available at each meeting.
Stay informed as the Federal Reserve releases new decisions and economic updates that could affect borrowing and saving rates.