Fed Raises Rates to 3.75%-4.00% in First Hike Since 2023

The Federal Open Market Committee voted 12-0 on September 16 to raise the target range for the federal funds rate by 25 basis points to 3.75%-4.00%. It is the first increase since 2023 and reverses the direction of policy after a stretch of cuts, with officials pointing to inflation readings that have stayed above the 2% long-run target.

The projections released alongside the decision suggest the committee is not finished. Sixteen of eighteen participants indicated they expect at least one more increase, and four of those saw room for two. Year-end rate projections from officials clustered between 4.1% and 4.4%.

The decision reprices borrowing costs across the market. Rate-sensitive holdings react in opposite directions: banks such as Bank of America can see wider net interest margins, while income names including Realty Income, Agree Realty and Medical Properties Trust face a higher discount rate on their distributions. Treasury yields had already moved ahead of the announcement, with the 10-year reaching its highest level since 2007 earlier in the week.