Story perspectives

Fed Raises Rates to 3.75%–4% as Inflation Stays High

By Drooid · Sep 25, 2026, 2:06 PM UTC · How we work

Summary

Story summary

The Federal Reserve raised its benchmark interest rate by a quarter point to 3.75%-4% on September 20, 2026.
Fed officials said additional policy adjustments will be needed to bring inflation back to the 2% target.
The consumer price index reported annual inflation at 3.4% in August 2026, above the Fed’s target.
Traders using CME Group’s FedWatch tool gave roughly a 70% chance of another quarter-point hike at the October 2026 meeting.

History

Historical Context

In June 1981 Fed Chairman Paul Volcker raised the federal funds rate to 20%, pushing prime rates to 21.5% and cutting inflation from a 14.8% March 1980 peak to below 3% by 1983, while the 1981-82 recession lifted unemployment above 10%. The September 2026 quarter-point hike to a 3.75-4% range, with a 70% chance of another rise, echoes Volcker’s tight-policy approach to anchor inflation near 2%.

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Story summary

The Federal Reserve raised its benchmark interest rate by a quarter point to 3.75%-4% on September 20, 2026.
Fed officials said additional policy adjustments will be needed to bring inflation back to the 2% target.
The consumer price index reported annual inflation at 3.4% in August 2026, above the Fed’s target.
Traders using CME Group’s FedWatch tool gave roughly a 70% chance of another quarter-point hike at the October 2026 meeting.

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