The Fed hikes unanimously for the first time since 2023

The Federal Open Market Committee “decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent” on September 16. It was the committee’s first increase since July 2023, and the vote was 12–0. In July the committee held at 3.50–3.75% over three dissents that preferred a hike. Two months later, nobody dissented from one.

The statement’s reasoning is short and new: “Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.” Its read of the real economy is confident. It says “Economic activity is expanding at a solid pace,” and “Job gains have kept pace with the workforce, and the unemployment rate has changed little.” At the press conference, Chair Kevin Warsh put it plainly: “The plain fact is that inflation is too high and has been for too long.”

What the committee now expects

The projections do more work than the statement. The median path now ends 2026 at 4.1%, which implies one more quarter-point increase at the October or December meeting. It stays there through 2027 before easing to 3.9% in 2028. In June the same committee saw the rate falling to 3.6% by the end of 2027. That is roughly half a point of higher-for-longer added to the medium-term path in a single quarter.

The question for 2026 is no longer when the first cut arrives. It is whether your deposit book reprices faster than your loan book on the way up again.

Where it lands on a community balance sheet

The mechanics started the next day. The Board raised the interest rate on reserve balances to 3.90% and the primary credit rate to 4.0%, both effective September 17. The discount window and the overnight yield on excess cash moved with the target range. Deposit competition moves more slowly and less evenly, and it is where a hiking cycle hurts institutions that fund with rate-sensitive balances.

The macro backdrop the committee cited is consistent with the month’s data. August payrolls rebounded to 162,000 with upward revisions to June and July, and headline CPI held at 3.4% on an energy-driven headline. The committee did not wait for the core, which has fallen to 2.4%, the lowest since March 2021. The hike is a bet that energy-led inflation stays in the headline long enough to matter for expectations.