Federal Reserve hikes key rate for first time in three years, defying Trump demands for cut

The Federal Reserve raised its benchmark interest rate on Wednesday (September 16, 2026) for the first time since 2023 in an effort to quell stubbornly-high inflation, a move that could spur a sharp response from the White House.

The quarter-point increase lifts the Fed's key rate to about 3.9% and, over time, could result in higher borrowing costs for mortgages, auto loans, and credit cards. In a set of quarterly projections, the Fed also signalled that its rate-setting committee expects to hike rates a second time later this year to 4.1%.

“Today's policy action will support a timelier return” to the central bank's 2% inflation goal, the Fed said in a statement.

The move comes as Americans are already struggling with high costs for groceries, gas, and housing. Affordability has taken on a leading role in the upcoming midterm elections, just seven weeks away.