Fed raises rates 25 basis points to 3.75%-4%, first hike under Warsh as Brent hovers near $107

The Federal Reserve raised its policy rate by 25 basis points to 3.75% to 4%, ending five consecutive meetings of holding rates steady. It was the first rate increase since Chair Warsh took office. The Federal Reserve released the decision and an updated rate dot plot.

The Federal Reserve reconsidered two factors. First, at the Jackson Hole global central bank symposium, Warsh described the 2% PCE inflation target as clear and unshakable, and stated explicitly that the decline in inflation data in summer 2026 did not represent a substantial improvement in the underlying inflation trend. Second, the August employment report overturned the claim that the labor market had stalled. The Federal Open Market Committee had previously been concerned about inflation while constrained by a fragile labor market; that situation has now eased somewhat.

As conflict around the Strait of Hormuz escalated, Saudi Arabia's East-West oil pipeline remained closed. As of September 15, Brent crude hovered at $107 a barrel, while WTI crude was above $100 a barrel. Before the first shock had fully faded, the Federal Reserve faced a second energy shock. The Federal Reserve chose to act now rather than continue waiting.