On September 16 the US Federal Reserve lifted its main policy rate by a quarter of a percentage point, setting the new target band at 3.75 to 4 percent. Borrowing costs now sit at their steepest level in more than a year, the result of a campaign to force inflation lower that officials say is not yet finished. The quarter point rise was the latest step in a sequence of increases the bank has made through the year.
The decision passed the Federal Open Market Committee without a single objection, on a vote of 12 to nothing. Policymakers wrote that price growth had held up more strongly than they wanted, and they cast the increase as proof that the Fed would not let inflation lodge above its 2 percent target. The step wrong-footed traders who had wagered early in the year that cuts were the next move.
Chair Kevin Warsh told reporters that inflation was still running hot and had done so for too long. He refused to lock the bank into a timetable, saying each meeting would turn on the newest readings rather than a preset plan. That stance keeps the option of another hike alive while giving the committee cover to hold steady if the data soften.
The projections published beside the decision sketched the likely path. On balance, officials expect one additional increase before 2026 closes and one more during 2027, with nothing further after that. Read together, the forecasts suggest the tightening phase is drawing toward its end even as the pressure on prices stays on for now. The same projections implied that officials expect no further moves once those near-term increases are complete.
Rate changes at the Fed reach well past Wall Street, raising the cost of mortgages, car finance and credit card debt while lifting the return that savers earn. The bank’s choices also weigh on the rest of the world, steering currencies, capital flows and the calculations of other central banks. For markets in Europe and the Nordic region, the question through the autumn is whether Warsh follows through on the extra move he has signaled or decides the job is nearly complete.
