# Federal Funds Rate The overnight rate at which banks lend reserves to each other, targeted by the Federal Open Market Committee — the lever behind every other interest rate in the economy, from [[Mortgage Rates]] to credit cards to the Treasury curve. Unlike every other indicator in this folder, this one isn't *measured*, it's *decided* — which is exactly why it sits at the center of the independence fight. ## Latest reading *As of 2026-10-07 · refreshed monthly · the cross-indicator read lives at [[State of the US Economy]].* - **Target range: 3.75–4.00%** after the **Sept 16, 2026** hike (12–0, the first hike since 2023). Interest on reserve balances is 3.90%. - **September projections (median):** fed funds **4.1% at end-2026**, which implies one more hike. Projected 2026 PCE inflation is 3.7% (core 3.4%), unemployment 4.1%, and GDP growth 2.3%. - **Curve:** 2-year **4.84%**, 10-year **5.31%** (Oct 5). The 2s10s spread is about **+48bp**, so the curve is not inverted. - **Peers are tightening too:** the [[European Central Bank]] raised its deposit rate to 2.50% (September, its second hike of 2026), and the Bank of Japan raised to 1.25%. See [[Global Economy Hub]]. - **Next FOMC:** **Oct 27–28**, then Dec 8–9. *Sources:* [Fed statement, Sept 16, 2026](https://federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm) · [AP via OPB](https://www.opb.org/article/2026/09/16/federal-reserve-hikes-key-rate-for-1st-time-in-3-years-defying-trump-demands-for-a-cut/) · [Fed projections table](https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20260916.htm) · [FOMC calendar](https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm) · [Treasury yield curve](https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202610) · [FRED DGS10](https://fred.stlouisfed.org/series/DGS10) · [ECB key rates](https://www.ecb.europa.eu/stats/policy_and_exchange_rates/key_ecb_interest_rates/html/index.en.html) ## Why it's politically radioactive Presidents always want lower rates (cheap money = good economy = re-election); the Fed's job is to ignore them. The norm of public presidential silence on Fed policy, observed roughly from Clinton through Obama, died in Trump's first term and was buried in his second: sustained public demands for cuts, floated firings, and an administration "investigation" of the institution. The structural stakes: a central bank perceived as politically captured loses its power to anchor [[Inflation Expectations]] — the markets-and-history lesson from Arthur Burns accommodating Nixon before the Great Inflation, and from every emerging-market economy where the executive set rates. ## The 2026 handover The April 2026 FOMC held at 3.5–3.75% in [[Jerome Powell]]'s final meeting as chair — an 8–4 vote, the most dissents at a single meeting since 1992, splitting over how much Iran-war and tariff inflation to look through with sentiment at record lows. [[Kevin Warsh]] was sworn in as chair on May 22, 2026 (Powell's chair term expired May 15; he served as chair pro tempore in between), with Powell remaining on the Board until the Fed "investigation" concludes — an unprecedented ex-chair-as-observer arrangement. Every Warsh-era decision now carries a dual reading: monetary policy, or deliverable? The dissent pattern and the Powell board presence are the metrics to watch. ## The September 16, 2026 hike — the dual reading resolved, for now On **September 16, 2026** the FOMC raised the target range a quarter point to **3.75%–4%**, its first increase in more than three years — the last hike was July 2023. The vote was **12–0**. The statement's operative sentences are two: *"Inflation remains elevated"* and *"Today's policy action will support a timelier return to the Committee's 2% goal."* The forecasts released with the decision show policymakers expecting an average of one more quarter-point increase this year and none in 2027; Warsh, who has deliberately discouraged forward guidance, offered no forecast of his own. The inflation it is aimed at is substantially the war's. August CPI ran **3.4%** annual and **0.4%** month-over-month, with gasoline alone accounting for more than a third of the monthly increase; diesel averaged **$6.31 a gallon** on the day of the decision. That chain runs back through [[Gas Prices]] to [[Bab el-Mandeb]] and the [[East-West Crude Oil Pipeline]] — two chokepoints and an energy war, arriving at the policy rate. The ten-year Treasury topped **5%** the same week. **The politics are the point of the entry.** Warsh was the administration's choice, installed after sustained public demands for cuts, and his first big move was a hike against them. He had set it up at Jackson Hole on **August 28, 2026**: *"The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank."* [[Donald Trump]]'s response was to post that rates "should be 1%, or less, because we are the Best Credit in the World—BY FAR," and, at a North Carolina rally, to read the decision as personal: "They're raising the rates to make Trump do as bad as they can possibly do… that's a raise against Trump." So the dual reading above has one data point, and it cuts against the capture hypothesis: the deliverable was not delivered. What that does *not* settle is the institutional question — an appointee who is hawkish by conviction is not the same thing as an independent central bank, and the "investigation" and the Powell board seat are both still live. The metric to watch is unchanged: what happens at the first meeting where the hawkish call and the political call point the same direction. ## See Also - [[Inflation Expectations]] — what independence protects - [[Yield Curve Inversion]] — the market's verdict on the rate path - [[Federal Reserve]] — the institution - [[Interest Rate Policy Timeline]] — the full history of the rate and the fight over who sets it, 1913–2026