Federal Reserve Raises Rates at September Meeting as Inflation Stays Elevated

The Federal Reserve raised interest rates at its September 16, 2026 meeting, lifting the federal funds target range to 3.75 to 4.00 percent.

Markets had priced in a 92 to 95 percent probability of a 25-basis-point hike heading into the meeting. The decision followed a speech by Fed Chair Kevin Warsh at the Jackson Hole Economic Symposium in late August, where he said the committee would have "work to do" if it lacked confidence that inflation was declining toward its 2 percent target.

August inflation came in at 3.4 percent, above the Fed's target but below the 4.2 percent peak reached earlier in 2026. Energy prices, driven in part by the ongoing conflict involving Iran, have kept inflation elevated throughout the year.

The 10-year U.S. Treasury yield hovered near 5 percent ahead of the meeting, the highest level since 2007. Oil prices remained above $100 per barrel, with Brent crude settling near $108.75 per barrel in recent sessions.

Treasury Secretary Scott Bessent had publicly expressed skepticism about raising rates into a supply shock, arguing the move may be premature. Economists at Citigroup also noted that softer hiring data did not support an urgent need for tighter policy.

Three FOMC members had dissented at the July meeting, favoring an immediate rate increase. The September hike brings the Fed's policy rate to its highest level since the post-pandemic tightening cycle.

Annual interest payments on the national debt now exceed $1 trillion, surpassing the annual defense budget. The gross national debt crossed $40 trillion in August 2026, growing at an average of $7.35 billion per day over the past year.