The Federal Reserve raised its target range for the federal funds rate by a quarter point to 3.75%–4.00% on September 16, 2026, in a 12–0 vote. It was the Fed's first increase since 2023. The minutes of that meeting, released October 7, add the part the short statement left out: all participants supported the move, and most said another increase would likely be appropriate by the end of the year. The next meeting is October 27–28.
Inflation is the reason. Fed staff estimated that PCE inflation, the Fed's preferred measure, rose to 3.8% in August, with core PCE at 3.4%. Officials pointed to higher oil and fuel prices tied to geopolitical events, heavy AI-related investment, and the tail of earlier tariff increases, and said they had not seen enough progress on inflation in recent months. Several described the current policy rate as not restrictive, or only mildly restrictive.
The job market is not holding them back. Officials judged the labor market to be close to maximum employment and saw the risks to it as broadly balanced. That view was formed before the October 2 jobs report, which showed 29,000 new jobs in September and 60,000 in downward revisions to July and August.
Long rates moved first. Between the July and September meetings, Treasury yields rose about 35 basis points across 2- to 10-year maturities, and mortgage rates rose a little more than the 10-year yield. Officials named housing as the one sector where financing conditions were not supportive.
The prime rate, which most variable-rate credit cards and home equity lines are priced from, moved from 6.75% to 7.00% the day after the decision. A variable APR usually follows within a billing cycle or two.
| Account | Balance | Extra interest per year, one 0.25-point hike | If one more hike follows |
|---|---|---|---|
| Credit card (variable APR) | $6,000 | $15 | $30 |
| HELOC (variable, prime-based) | $50,000 | $125 | $250 |
On a card, the hike is the small part of the bill. The average APR on accounts that paid interest was 22.36% in August (Federal Reserve G.19), so $6,000 costs about $1,342 a year in interest before the hike adds $15. Paying the balance down does far more than any Fed decision. On a large HELOC the increase is easier to feel, and fixing part of the balance, where the lender allows it, is worth pricing.
Savings is where a hike should help and often doesn't. The Fed now pays banks 3.90% on reserve balances, yet the FDIC's national average savings rate was 0.37% in September and the average 12-month CD was 1.73%. On $10,000 that is $37 a year against $173. Banks do not pass rate increases to savers automatically, so the gain comes from moving money, not from waiting.
Treat one more quarter point by December as the likely case, not a certainty. The minutes say each decision depends on incoming data, and the September CPI on October 14 is the next big input. Until then, the moves are the same whichever way the Fed goes: pay down variable-rate debt first, price fixed options on large variable balances, and put idle cash where it actually earns the higher rates.
See what the hike costs you. The Credit Card Payoff Calculator shows interest and payoff time at your APR, and the HELOC Calculator runs a variable balance at the new prime rate.
Related tools: Credit Card Payoff Calculator · HELOC Calculator · Savings Calculator · CD Calculator