Fed Lifts Rate to 3.90% in First Hike in Three Years

The Federal Reserve raised the interest rate paid on bank reserves to 3.90% on September 16, 2026. Federal Reserve

The Board voted unanimously. The vote put in place a 25-basis-point tightening, with a basis point equal to 0.01% so 25 points is a quarter point, at the close of the September 15-16 FOMC meeting. That meeting, the Fed's rate-setting meeting, had been listed on the calendar with a Statement. Before the decision, the target range was 3-1/2 to 3-3/4 percent, where the Committee had left it on July 29, 2026. Federal Reserve

Pricing showed markets expected the move. Minutes of the July meeting, published August 19, noted markets were fully pricing in a 25-basis-point hike by September. Federal Reserve By September 14, futures pricing implied about a 90% probability of a quarter-point move, up from about 70% before the latest inflation data. Reuters Economists surveyed ahead of the meeting expected a quarter-point increase to 3.75%-4.00%. Reuters

It was the first increase since July 2023. Reuters It was also the first under Warsh. Reuters The tightening came after President Trump had demanded a rate cut ahead of the September 16 decision. BNN Bloomberg Gold pared its advance after the quarter-point increase. After September 16, the Federal Reserve penciled in an additional interest-rate hike. Bloomberg

The broader context here is calibration rather than a new regime. A unanimous vote on reserves alongside a fully priced FOMC move keeps the Fed's administered rates, overnight borrowing costs and the effective funds rate in line. There was no dissent to parse. The 3.90% setting preserves a small spread above the bottom of the range. That keeps the incentive for banks to hold reserves at the Fed.

In my view, the sequence matters more than this single step. A first hike in more than three years, plus guidance for another, lifts where investors think rates will peak. It did not force a repricing of September itself. That explains how odds could move from 70% to 90% on inflation data while the minutes already showed full pricing. Traders were not debating the start. They were pricing persistence. The risk now sits less in this level than in duration and the pace of a follow-on move, with funding costs, deposit rates and reserve demand as the channels to watch for savers and borrowers.