Fed raises rates by a quarter point to 3.75–4%

The Federal Reserve raised the target range for the federal funds rate by 0.25 percentage points to 3.75%–4% on Wednesday, September 16. The decision was approved by 12 votes to zero. [1]

Why raise rates now?

The central bank cites a solid economy and persistent inflation. It seeks a faster return to its 2% goal, without guaranteeing the outcome. [1]

Associated Press notes that this is the first increase since 2023 and reports that another rise could occur this year. That possibility should not be presented as a decision already taken. [3]

What takes effect Thursday

The implementation note sets September 17 as the effective date and interest on bank reserve balances at 3.90%. This operating rate is distinct from the target range: the figures do not contradict each other. [2]

These central-bank instruments do not set the rate on every loan. The note therefore cannot determine a household’s next monthly payment or establish that all borrowing costs will increase equally. [2]