Fed Raises Rates to 3.75% to 4% Range

The Federal Reserve's quarter-point increase on Sept. 16 marked its first short-term rate hike since July 2023.

Updated on Nov. 3, 2026 in Inflation

Bold vector editorial illustration of stacked steel blocks climbing a steep ramp beside a concrete wall, one block lifted above the rest, in coral, teal, and cream. — The Federal Reserve raised its benchmark interest rate a quarter point to between 3.75 and 4 percent on Sept. 16, its first short-term hike since July 2023. AI Illustration. Upload story photo >

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The Federal Reserve raised its benchmark interest rate a quarter point on Sept. 16, lifting it to between 3.75 percent and 4 percent. The move was the Fed's first short-term rate increase since July 2023, as it cited inflation well above its 2 percent target.

Why it matters

Stubborn inflation, compounded by a war with Iran, ended lenders' hopes of lower interest rates. Higher borrowing costs are pushing commercial real estate lenders toward more defensive, selective strategies.

The Fed's quarter-point hike moved its benchmark rate to 3.75% to 4%, against a 2% inflation target. The 10-Year Treasury yield crossed 5% on Sept. 14 and reached its highest level since 2007 on Sept. 15, and the future path of inflation remains unresolved.

The players

Federal Reserve

The central bank of the United States, which sets the benchmark interest rate that influences borrowing costs across the economy.

Kevin Warsh

The new Chair of the Federal Reserve, who leads the central bank's policy decisions including interest rate changes.

The details

The Fed raised rates through a quarter-point increase at its September FOMC meeting, and lenders are now running more scenario analyses to test deals across a wider range of rate and valuation outcomes. Fed governors paused rates at the Oct. 28 FOMC meeting.

Sept. 14: The 10-Year Treasury yield crossed the 5 percent threshold.
Sept. 15: The 10-Year Treasury yield hit its highest level since 2007.
Sept. 16: The Fed raised its benchmark rate a quarter point.
Oct. 28: Fed governors paused rates at the FOMC meeting.
End of 2026: The Fed's dot plot signaled one more rate hike.

Macro View

The September 2026 quarter-point hike was the Fed's first short-term rate increase since July 2023, resuming tightening after that earlier move. The FOMC is expected to continue a hawkish strategy fighting inflation heading into 2027, with the federal funds rate projected to remain around 4.1 percent through the end of 2027.

Higher benchmark rates raise borrowing costs for businesses and households, pushing commercial real estate lenders toward more selective deals. Lenders are running wider scenario analyses to test whether projects can absorb rates that may stay near 4.1 percent through 2027.

The takeaway

Watch the Fed's rate path closely, since the projected 4.1 percent federal funds rate through 2027 means borrowing costs are likely to stay elevated for an extended period. Households and businesses should plan budgets and debt decisions around that sustained level.

What happens next

The dot plot signals one more rate hike by the end of 2026, and the federal funds rate is projected to remain around 4.1 percent through the end of 2027.