The Federal Reserve raised interest rates on Wednesday, September 16, 2026. At 2 p.m. Eastern, its policy committee announced that it had lifted the target range for the federal funds rate by a quarter of a percentage point, to 3.75% to 4%. The new range takes effect Thursday, September 17.
It’s the Fed’s first increase since July 2023, according to its record of rate changes. It also undoes the Fed’s most recent cut, made in December 2025.
What did the Fed decide?
The Federal Open Market Committee, the group that sets the Fed’s benchmark rate, voted 12 to 0 for the increase. In July, the same committee held the range at 3.5% to 3.75% in a 9 to 3 vote, and all three members who voted against it wanted a quarter-point increase then.
The Fed also raised two rates it sets for banks, according to its implementation note. The interest it pays on the reserves banks keep at the Fed rises to 3.90%, and its primary credit rate, which it charges on short-term loans to banks, rises to 4%. Both changes take effect September 17.
Why did the Fed raise rates?
Inflation. The committee’s statement says: “Inflation remains elevated.” It adds that the increase “will support a timelier return” to the Fed’s 2% inflation goal.
The rest of the statement describes a growing economy. Economic activity “is expanding at a solid pace,” domestic spending “has been resilient,” and job gains “have kept pace with the workforce,” while the unemployment rate “has changed little.”
What do Fed officials expect for rates?
With the decision, the Fed released its officials’ projections. Their median projection puts the federal funds rate at 4.1% at the end of 2026, which is where one more quarter-point increase would leave it, and at 4.1% at the end of 2027. In June, the same projections were 3.8% and 3.6%.
The officials also raised their projection for 2026 inflation, measured by the PCE price index, to 3.7% from 3.6% in June. These are the officials’ own forecasts, not decisions, and today’s statement doesn’t say what the committee will do at its next meeting.
Does the Fed’s hike raise mortgage rates?
Not directly. The federal funds rate is, in the Fed’s words, “the interest rate that banks pay to borrow reserve balances overnight.” Nobody takes out a mortgage at that rate, and a fixed-rate mortgage you already have doesn’t change.
Rates on new 30-year loans follow their own path. The Fed’s explainer says rates on longer-term loans are related to expectations for policy and the economy over the life of the loan, “not just to the current level of the federal funds rate.” They can move before a Fed decision, after it, or in the opposite direction.
For a starting point, Freddie Mac’s weekly survey put the average 30-year fixed rate at 6.76% on September 10, 2026, up from 6.35% a year earlier (Freddie Mac). Its next update comes out Thursday, September 17, at noon Eastern.
Which loans feel it first?
Loans with rates that float. The same Fed explainer says changes in its rate are rapidly reflected in floating-rate loans, “including floating-rate mortgages as well as many personal and commercial credit lines.” Home equity lines of credit are a common example: the Consumer Financial Protection Bureau says HELOCs usually have a variable interest rate, so the payment can change from month to month.
If a variable rate rises by the full quarter point, here is what it adds in interest:
| Each month | Each year | |
|---|---|---|
| $25,000 balance | About $5 | About $63 |
| $50,000 balance | About $10 | $125 |
| $100,000 balance | About $21 | $250 |
These are example figures, not a quote.
What does it mean if you invest in real estate?
It depends on how you borrow.
- Buying with a fixed-rate loan: the rate a lender quotes you matters more than the Fed’s, and loans on rentals carry fees that loans on homes you live in don’t. Here’s how each quarter point changes a rental’s cash flow.
- Borrowing your down payment on a HELOC: that payment can rise with decisions like this one. Here’s what a HELOC payment does to a rental’s numbers.
- Owning with a fixed-rate mortgage: today’s decision doesn’t change your payment.
What happens next?
- Thursday, September 17, at noon Eastern: Freddie Mac’s next weekly mortgage rate average.
- October 27 and 28: the committee’s next meeting, on the Fed’s meeting calendar.
- December 8 and 9: the last meeting of 2026, when officials also publish new projections.
If you have a HELOC or another variable-rate loan, check its terms or your next statement to see when its rate can change.