The Federal Reserve raised its benchmark interest rate by a quarter point on September 16, 2026, lifting the target range for the federal funds rate to 3-3/4 to 4 percent. The prime rate moved with it, rising from 6.75 percent to 7.00 percent effective today, September 17. The Federal Open Market Committee approved the statement by a 12 to 0 vote, and the increase takes effect one day after the decision, the standard schedule for a policy change. It is the first increase in the federal funds target since 2023 and the first move in the prime rate in either direction since December 11, 2025, when banks cut it to 6.75 percent. Eight lenders including U.S. Bank, PNC, KeyCorp, Regions, M&T, BNY, BMO and Associated Banc-Corp posted the new 7.00 percent figure within hours of the statement. The FOMC framed the action around prices rather than growth, writing that inflation remains elevated and that the increase supports a timelier return to its 2 percent goal. For borrowers, the arithmetic is immediate: every product priced off prime, from variable-rate credit cards to home equity lines, reprices on the lender’s next cycle. The link between the funds rate and prime is mechanical, and it has already closed.
Key Takeaways
- The FOMC raised the federal funds target range a quarter point to 3-3/4 to 4 percent on a 12 to 0 vote.
- The prime rate rises from 6.75 percent to 7.00 percent effective today, September 17, 2026.
- This is the first prime rate increase since July 27, 2023, a gap of 1,148 days.
- The Board raised the rate on reserve balances to 3.90 percent and the discount rate to 4.0 percent.
- Sixteen of 18 policymakers penciled in at least one more increase before the end of 2026.
Table of Contents
What the Fed actually changed
The FOMC statement released at 2:00 p.m. Eastern on September 16 decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent. The Committee said it is continuing its policy of maintaining ample reserves in the banking system, language that signals no change to the balance sheet alongside the rate move. The accompanying Implementation Note carried the operational detail. The Board of Governors voted unanimously to raise the interest rate paid on reserve balances to 3.90 percent, effective September 17, and approved a quarter point increase in the primary credit rate to 4.0 percent on the same date.
The Open Market Desk at the New York Fed was directed to hold the funds rate inside the new range starting September 17, to run standing overnight repurchase operations at 4.0 percent, and to offer overnight reverse repurchase agreements at 3.75 percent with a per-counterparty cap of $160 billion per day. Seven Reserve Bank boards formally requested the higher discount rate: Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City and Dallas. The Desk also keeps buying Treasury bills as needed to maintain ample reserves and rolling over principal from maturing Treasury holdings. The Fed’s balance sheet stood at $6.74 trillion in the week ended September 9, and nothing in this statement alters that path.
The vote and the new projections
The 12 to 0 vote is the notable part. The Committee has been openly split for most of 2026, and the July minutes recorded a 9 to 3 decision with three dissents. This time no one broke ranks. The statement described economic activity as expanding at a solid pace, noted that domestic spending has been resilient and that job gains have kept pace with the workforce, then turned to prices: inflation remains elevated, and the Committee said it will deliver price stability. Chair Kevin Warsh told reporters afterward that three conditions had shifted since the July meeting, naming a stronger economy, inflation that failed to slow, and intensifying geopolitical tensions.
The quarterly Summary of Economic Projections moved further than the statement did. The median projection for the federal funds rate at the end of 2026 rose to 4.1 percent from 3.8 percent in June. With the new midpoint at 3.875 percent, the dot plot shows 12 of 18 participants at 4.125 percent and four more at 4.375 percent for year end. That is 16 of 18 expecting at least one additional quarter point increase across the two remaining meetings, and four expecting two. Only two participants see the rate finishing 2026 where it sits today. Median PCE inflation for 2026 was marked up to 3.7 percent from 3.6 percent, core PCE to 3.4 percent from 3.3 percent, and the unemployment rate down to 4.1 percent from 4.3 percent.
Prime returns to 7.00 percent
Banks set the prime rate at 3 percentage points above the upper bound of the federal funds target range, a convention that has held without exception through the last four tightening and easing cycles. With the upper bound now at 4 percent, prime is 7.00 percent. Announcements landed the same afternoon. U.S. Bancorp, PNC, KeyCorp, Regions, M&T, BNY, BMO and Associated Banc-Corp each confirmed a move from 6.75 percent to 7.00 percent effective September 17. The Federal Reserve H.15 release will carry the new bank prime loan rate once the daily series catches up.
Context matters for how unusual this is. Prime had held at 6.75 percent since December 11, 2025, a stretch of 280 days. The last time it moved up rather than down was July 27, 2023, when banks took it from 8.25 percent to 8.50 percent. That is 1,148 days between increases. Everything in between was a descent: 8.00 percent in September 2024, 7.75 percent that November, 7.50 percent in December, then 7.25 percent in September 2025 and 7.00 percent at the end of October 2025. Today’s move returns prime to exactly the level it held for six weeks late last year, and the longer history of the prime rate shows reversals of this kind are rare.
What a 7.00 percent prime does to your rates
Variable-rate credit cards reprice first. Card APRs are written as prime plus a margin, so a quarter point increase passes through on the next statement cycle for most issuers. Federal Reserve data put the average rate on all credit card accounts at 20.94 percent and the average on accounts assessed interest at 22.15 percent before this move. On a $6,000 revolving balance, a quarter point works out to roughly $15 a year in additional interest, and on a $50,000 home equity line it is about $125 a year, or close to $10 a month. Those are straight arithmetic on the rate change, not lender quotes.
Fixed-rate borrowing responds differently. Mortgage rates track the 10-year Treasury rather than prime, and the 30-year average was 6.76 percent in the week ended September 10, with the 10-year note closing at 5.00 percent on September 15. Existing fixed-rate personal loans and auto loans do not change at all. Savers get the other side of the trade. Banks price deposits against short Treasury yields and the funds rate, so CD offers and high-yield savings rates tend to follow an increase upward, though historically more slowly and less completely than card rates do.
Pro Tip: If you carry a balance on a variable-rate card, check your next statement for the new APR rather than assuming the old one. With 16 of 18 policymakers projecting at least one more increase this year, a balance transfer to a fixed promotional rate is worth pricing now instead of after the October meeting. If you are on the saving side, do not wait for your bank to reprice on its own. Deposit rates move up slowly, and the best offers usually come from institutions competing for new money.
Frequently asked questions
Did they raise interest rates today?
Yes. The Federal Reserve raised the federal funds target range by a quarter point to 3-3/4 to 4 percent on September 16, 2026, and the change takes effect today, September 17. The prime rate rose from 6.75 percent to 7.00 percent on the same date. The vote was 12 to 0.
Did the Fed cut rates today?
No. The Fed did the opposite. The FOMC raised the target range for the federal funds rate by 1/4 percentage point, its first increase since 2023, after holding at 3-1/2 to 3-3/4 percent since December 2025. The Committee cited elevated inflation as the reason, writing that the action supports a timelier return to its 2 percent goal. Every prior move since September 2024 had been a cut, so this reverses the direction of policy rather than extending it.
Did Kevin Warsh raise interest rates?
The decision belongs to the Federal Open Market Committee, not to the Chair alone, and the September 2026 vote was unanimous at 12 to 0. Kevin Warsh chairs the Committee and presented the decision at the post-meeting press conference, where he said the economy had strengthened, inflation had not slowed and geopolitical tensions had intensified since the July meeting. All 12 voting members supported the increase, so no dissent was recorded against him or with him.
Does the Fed rate hike affect the prime rate?
Directly and immediately. Banks set prime at 3 percentage points above the upper bound of the federal funds target range. When the FOMC lifted that upper bound from 3.75 percent to 4 percent, prime moved from 6.75 percent to 7.00 percent. U.S. Bank, PNC, KeyCorp, Regions, M&T, BNY, BMO and Associated Banc-Corp all announced the new rate effective September 17, 2026. That relationship has held through every rate cycle since the 1990s.
What does a 7.00 percent prime rate mean for my credit card?
Most variable-rate cards are priced as prime plus a fixed margin, so your APR rises a quarter point on your issuer’s next repricing cycle, usually within one or two statements. Federal Reserve data put the average rate across all card accounts at 20.94 percent before this change. On a $6,000 balance, a quarter point adds about $15 of interest a year. Fixed-rate cards and existing fixed personal loan balances are not affected by the change.
When is the next Fed meeting?
The FOMC has two meetings left in 2026: October 27 and 28, and December 8 and 9. The Committee releases its statement at 2 p.m. Eastern on the second day of each meeting, with a press conference at 2:30 p.m. The September projections show 16 of 18 participants expecting the funds rate to end 2026 above its current level, which implies at least one more quarter point increase across those two dates.
Watching the October meeting
The October 27 and 28 meeting now carries the weight the market had assigned to September. Sixteen of 18 projections point to another quarter point before year end, which would put prime at 7.25 percent, but the Committee has revised its own path twice already this year. The September and October inflation prints arrive first, and the Fed meeting calendar leaves little room between them. Track the current prime rate and the 2026 rate forecast as those numbers land.
References
- Board of Governors of the Federal Reserve System, Federal Reserve issues FOMC statement, September 16, 2026.
- Board of Governors of the Federal Reserve System, Implementation Note issued September 16, 2026.
- Board of Governors of the Federal Reserve System, Summary of Economic Projections, September 16, 2026.
- Board of Governors of the Federal Reserve System, FOMC Meeting Calendars, 2026 schedule.
- Board of Governors of the Federal Reserve System, H.15 Selected Interest Rates, September 2026.
- Federal Reserve Bank of St. Louis, Bank Prime Loan Rate (DPRIME), full series through September 15, 2026.
- Federal Reserve Bank of St. Louis, Commercial Bank Interest Rate on Credit Card Plans, All Accounts.
- U.S. Department of the Treasury, Fiscal Data, Debt to the Penny, record date September 15, 2026.
