Federal Reserve
September 2026 Fed rate increase: what 25 basis points means
The Fed raised its target range to 3.75%–4.00% on September 16. Understand the change and its possible effects on loans and savings.
What the committee decided
The September 16 FOMC statement records a unanimous 12–0 vote and describes inflation as elevated. It also describes resilient domestic spending and solid economic activity. This is the decision from that meeting; it should not be presented as a prediction of the next one.
Basis points versus percent
One basis point is 0.01 percentage point, so 25 basis points equals 0.25 percentage point. Moving from 3.50% to 3.75% is a 25-basis-point increase, not a 25% rate. Confusing the units can make a modest change sound far larger than it is.
What an illustrative borrowing comparison shows
On a constant $10,000 balance, an additional 0.25 percentage point would equal roughly $25 more annual interest if it passed through fully and stayed in place for a year. Actual loans have changing balances, product-specific pricing, and contractual rules. The Fed’s target range is not your credit-card APR or mortgage quote.
Savings and existing loans may respond differently
Deposit rates depend on the institution and product. A fixed-rate loan follows its agreed terms, while a variable-rate product follows its own index and reset rules. Review the advertised APY, fees, penalties, and access restrictions on any savings offer. Our interest-rate guide explains the broader transmission process, and the CD calculator compares hypothetical returns.
Why a fresh inflation release does not settle the next decision
Policymakers assess multiple observations and how conditions respond over time. A single CPI or PCE result can change the discussion without guaranteeing a rate move. Distinguish a committee announcement, an individual official’s view, and a market forecast. The AI-inflation article is an example of the second category.