Fed Raises Interest Rates by 0.25% for First Time Since 2023

The Federal Reserve raised the federal funds target range by 25 basis points to 3.75%-4.00% on Wednesday, marking its first rate increase since 2023. In its policy statement, the Federal Open Market Committee said, "inflation remains elevated. Today's policy action will support a timelier return to the Committee's 2 percent goal. " The decision was unanimous.

The updated dot plot showed the median official projecting a year-end 2026 fed funds rate of 4.1%, up from June's 3.8% and implying one additional hike by December. The 2027 median moved to 4.1% from 3.6% in June. Fed Chair Kevin Warsh is slated to hold the press conference at 2:30 p.m. ET.

What September's Fed Projections Show The projections carried a hawkish edge well beyond this year. The 2027 median jumped to 4.1% from 3.6% in June, wiping out the rate cuts officials had penciled in for next year and implying the funds rate stays at its 2026 peak through the whole of 2027. The longer-run neutral estimate nudged up to 3.2% from 3.1%. The forecast revisions explain the shift.

Officials marked their 2026 unemployment rate projection down to 4.1% from 4.3% in June and lifted this year's real GDP growth estimate to 2.3% from 2.2%, while raising headline PCE inflation to 3.7% from 3.6% and core PCE to 3.4% from 3.3%. In short: a stronger labor market and firmer inflation, with the return to 2% pushed out to 2029 on the headline measure.

September Summary Of Economic Projections: Medians Variable 2026 2027 2028 2029 Longer run Change in real GDP 2.3 2.4 2.2 2.1 2.0 June projection 2.2 2.3 2.2 — 2.0 Unemployment rate 4.1 4.1 4.1 4.1 4.2 June projection 4.3 4.3 4.2 — 4.2 PCE inflation 3.7 2.3 2.1 2.0 2.0 June projection 3.6 2.3 2.0 — 2.0 Core PCE inflation 3.4 2.5 2.2 2.0 — June projection 3.3 2.5 2.1 — — Federal funds rate 4.1 4.1 3.9 3.6 3.2 June projection 3.8 3.6 3.4 — 3.1 Source: Federal Reserve Summary of Economic Projections, Sept. 16, 2026. Percent. How Markets Reacted To The Fed Decision The knee-jerk move was a sharp two-way whipsaw across every asset class.

Rates repriced first. The 2-year Treasury yield spiked as high as 4.65% within a minute of the release, retraced, then settled at 4.642%, roughly 3 basis points above where it sat before the announcement. Gold — tracked by the SPDR Gold Shares (NYSE: GLD ) — took the brunt of it. Spot bullion had been up 1.4% on the day at $4,360 an ounce heading into 2 p.m.; it slid to $4,332.81 within six minutes, turning negative at -0.25% and round-tripping the entire session's rally.

The U.S. dollar index firmed 0.2% to 99.55. Equities split along the same line they had traded all day. The Nasdaq 100 pushed to a fresh session high at 29,225.84, up 0.3%, and the S&P 500 held a 0.1% gain at 7,623.90.

The Dow slipped 0.1% to 52,119.15 and the Russell 2000 gave up its advance to trade flat at 2,883.30. Bitcoin (CRYPTO: BTC) rose 0.8% to $76,031. Photo: Shutterstock This is a developing story… Image: Shutterstock