FOMC Raises Federal Funds Target Range to 3-3/4 to 4 Percent

The Federal Open Market Committee raised the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent, announcing the decision on September 16, 2026 in a statement approved by a 12-0 vote and released at 2:00 p.m. EDT. The Committee said it acted in support of the Federal Reserve’s dual mandate and is continuing its policy of maintaining ample reserves in the banking system.

The decision follows the Committee’s July 28-29, 2026 meeting, at which it maintained the target range at 3-1/2 to 3-3/4 percent on a 9-3 vote.

In the September statement, the Committee characterized economic activity as expanding at a solid pace. It said uncertainty remains elevated owing in part to geopolitical developments, while domestic spending has been resilient. Productivity growth is strong and capital investment is robust, according to the statement, and job gains have kept pace with the workforce while the unemployment rate has changed little. The Committee said inflation remains elevated and that the action “will support a timelier return to the Committee’s 2 percent goal,” adding that it will deliver price stability.

The July statement had described uncertainty as owing in part to the conflict in the Middle East and inflation as elevated partly because of supply shocks that drove price increases in certain sectors, including energy. At the July meeting, Beth M. Hammack, Neel Kashkari, and Lorie K. Logan voted against the policy action, preferring to raise the target range by 1/4 percentage point.

Implementation Decisions

The Board of Governors voted unanimously to raise the interest rate paid on reserve balances to 3.90 percent, effective September 17, 2026, according to the implementation note issued with the statement.

Under the note’s domestic policy directive, the Open Market Desk at the Federal Reserve Bank of New York was directed, effective September 17, 2026 and until instructed otherwise, to undertake open market operations as necessary to maintain the federal funds rate within the 3-3/4 to 4 percent target range. The Desk was told to conduct standing overnight repurchase agreement operations at a rate of 4.0 percent and standing overnight reverse repurchase agreement operations at an offering rate of 3.75 percent, with a per-counterparty limit of $160 billion per day.

The directive also instructs the Desk, when appropriate, to increase System Open Market Account holdings of securities through purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of three years or less, to maintain an ample level of reserves. It further directs the Desk to roll over at auction all principal payments from the Federal Reserve’s holdings of Treasury securities and to reinvest all principal payments from its holdings of agency securities into Treasury bills.

In a related action, the Board voted unanimously to approve a 1/4 percentage point increase in the primary credit rate to 4.0 percent, effective September 17, 2026. In taking that action, the Board approved requests to establish the rate submitted by the boards of directors of the Federal Reserve Banks of Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, and Dallas.

Summary of Economic Projections

The Summary of Economic Projections released with the statement puts the median projection for real GDP growth at 2.3 percent in 2026, 2.4 percent in 2027, 2.2 percent in 2028, 2.1 percent in 2029, and 2.0 percent in the longer run. The comparable June medians were 2.2 percent for 2026, 2.3 percent for 2027, and 2.2 percent for 2028.

The median unemployment rate projection is 4.1 percent for each year from 2026 through 2029 and 4.2 percent in the longer run; the June medians were 4.3 percent for 2026 and 2027 and 4.2 percent for 2028. The median projection for PCE inflation is 3.7 percent in 2026, 2.3 percent in 2027, 2.1 percent in 2028, and 2.0 percent in 2029 and over the longer run, compared with a June median of 3.6 percent for 2026. For core PCE inflation, which excludes food and energy prices, the median is 3.4 percent in 2026, 2.5 percent in 2027, 2.2 percent in 2028, and 2.0 percent in 2029; the June 2026 median was 3.3 percent.

The median projection for the federal funds rate is 4.1 percent at the end of 2026 and at the end of 2027, 3.9 percent at the end of 2028, 3.6 percent at the end of 2029, and 3.2 percent in the longer run. In June, those medians were 3.8 percent for 2026, 3.6 percent for 2027, 3.4 percent for 2028, and 3.1 percent for the longer run. The rate projections represent the midpoint of each participant’s projected appropriate target range, or the projected appropriate target level, at the end of the specified calendar year or over the longer run; the growth and inflation projections are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated.

Of the 18 participants, 12 projected an end-2026 federal funds rate midpoint of 4.125 percent, 4 projected 4.375 percent, and 2 projected 3.875 percent, with individual entries rounded to the nearest 1/8 percentage point. Seventeen participants judged uncertainty about PCE inflation as higher than typical levels over the past 20 years, and 17 judged the risks to PCE inflation as weighted to the upside, with one viewing them as broadly balanced. On core PCE inflation, 15 participants saw risks weighted to the upside and 3 saw them as broadly balanced. On GDP growth, 13 participants judged risks as broadly balanced and 5 as weighted to the upside, while on unemployment 17 judged risks as broadly balanced and 1 as weighted to the downside.

Eighteen participants submitted projections in conjunction with the September 15-16, 2026 meeting; one of the 18 did not submit projections for 2028 and 2029. The projections were based on information available at the time of the meeting together with each participant’s assessment of appropriate monetary policy.

The September 15-16 meeting was associated with a Summary of Economic Projections, as the FOMC’s meeting calendar notes, and the Committee’s remaining 2026 meetings are scheduled for October 27-28 and December 8-9, with the December meeting also associated with a Summary of Economic Projections. Minutes of regularly scheduled meetings are released three weeks after the date of the policy decision; the minutes of the July 28-29 meeting were released on August 19, 2026.