U.S. Federal Reserve raises interest rates for the first time since 2023

September 16, 2026

Jenny Wang

The U.S. Federal Reserve (Fed) increased its target benchmark interest rate range by 0.25% to 3.75-to-4% following its September Federal Open Market Committee (FOMC) meeting. While the decision was widely anticipated, it was interesting to see FOMC members vote unanimously for the hike when preferences were split just last month. According to Chairman Warsh, “The plain fact is that inflation is too high and has been for too long.”

This month’s meeting was accompanied by the latest Summary of Economic Projections. In the near term, expected economic growth was revised marginally higher while unemployment was revised lower. As briefly outlined by the Fed, “Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”

The latest projections show that the Fed is expecting inflation to return to its 2% target in 2029. Shorter term expectations have inflation running a little higher than what was projected in June. “Inflation remains elevated. Today's policy action will support a timelier return to the Committee's 2% goal. The Committee will deliver price stability,” said the Fed.

For the 2026 ‘dot plot’ (a distribution chart showing where each FOMC member expects interest rates to be), two members expect to hold interest rates where they are, 12 members expect an additional 0.25% hike and four members have penciled in 0.5% worth of hikes. Once again, the Chairman declined to provide his dot.

After digesting the unanimous decision to raise rates, Summary of Economic Projections and the press conference, investors have regained some confidence in the Fed’s independence and resolve to combat inflation. However, despite expectations for another hike this year, uncertainty remains about how far the Fed will go to deliver price stability. The diversity of the dot plots for 2027, 2028 and 2029 is likely to cause additional volatility for investors. On Wednesday, equity markets turned lower, bond yields shed earlier declines and the U.S. dollar surged.

The strategic asset allocation of our clients' portfolios remains unchanged. We continue to focus on the long-term, building around long-term goals, long-term time horizons and long-term capital market expectations, which remain little changed. In client portfolios that include a tactical asset allocation component, over the next 12-to-18 months, where opportunities and risks are a bit clearer, we continue to be tactically overweight equities relative to fixed income and cash.

The current environment, where uncertainty is elevated and various forces are influencing economic and market outcomes, reinforces the value of professional portfolio management. Diversification across multiple asset classes, regions, styles and sectors remains as important as ever. As always, we will continue to monitor and assess economic developments, policy decisions and market conditions as they evolve.

The next FOMC interest rate announcement is scheduled for October 28^th.

Jenny Wang, CFA, MA Economics, is a Portfolio Manager with the Multi-Asset Management Team.  She is a member of the total portfolio management sub-team and her primary focus is on fixed income investments.