Fed Raises Interest Rates a Quarter Point to 3.75%–4% in Unanimous Vote

The Federal Reserve raised its benchmark interest rate by a quarter percentage point on September 16, lifting the federal funds target range to 3.75% to 4%. The decision was unanimous, a 12-0 vote, which stands in contrast to the July meeting, when the central bank held rates steady with three regional Fed presidents dissenting.

In its statement, the Federal Open Market Committee said inflation remains elevated and that the move is meant to support a timelier return to the 2% goal. Officials described economic activity as expanding at a solid pace, pointing to resilient domestic spending, strong productivity growth and robust business investment. On the labor market, the committee said job gains have kept pace with the growth of the workforce and that the unemployment rate has changed little. The Fed also said it will keep maintaining ample reserves in the banking system.

The decision had been widely anticipated after Chair Kevin Warsh gave a notably hawkish speech at the Jackson Hole symposium in late August. Market coverage at the time reported that traders raised their odds of a September hike and that stocks wobbled as investors weighed the prospect of higher borrowing costs, with several forecasters, including Barclays, saying they expected the Fed to move.

For households and businesses, a higher policy rate generally feeds through to credit cards, auto loans and, indirectly, mortgage rates, which have been stuck well above 6% for most of the year. The next test comes at the Fed's following meetings, where policymakers will again weigh stubborn inflation against signs that hiring has been cooling.

Reporting based on the Federal Reserve's September 16 policy statement and market coverage from Kiplinger and investingLive.