Update: Fed Lifts Policy Rate to Tame Inflation, Signals One More Hike This Year

03:15 PM EDT, 09/16/2026 (MT Newswires) -- (Updates to include the Summary of Economic Projections document and Oxford's comments.) The Federal Reserve raised its benchmark lending rate by 25 basis points in a unanimous vote on Wednesday to combat sticky inflation, while signaling another hike later this year. The central bank's Federal Open Market Committee lifted the federal funds rate to a range of 3.75% to 4%, the first time it has tightened monetary policy since July 2023. The Summary of Economic Projections showed the median policy rate at 4.1% at the end of 2026, up from 3.8% projected in June. The 2027 and 2028 outlooks were also revised higher -- to 4.1% and 3.9%, respectively -- from 3.6% and 3.4% previously estimated. "Inflation remains elevated," the FOMC said. "Today's policy action will support a timelier return to the committee's 2% (inflation) goal." Most economists, including those at Wall Street giants Goldman Sachs and Morgan Stanley, expected the Fed to raise interest rates on Wednesday. Goldman, however, didn't see a strong economic case for policy tightening amid an improvement in core personal consumption expenditure inflation. Late last month, Fed Chair Kevin Warsh said that the central bank's primary focus should be on prices, given that the US was doing well on the employment front. Data earlier this month showed the American economy added almost triple the jobs expected by Wall Street in August. The FOMC said it will "deliver price stability." Crude oil prices rallied past $100 a barrel this month amid intensifying hostilities in the Middle East, while diesel in the US has hit record highs. Official data showed last week that US consumer inflation and producer prices hit three-month highs in August as energy costs rose. The Fed is expected to tighten its policy by another quarter-point later this year, "before falling inflation allows them to move to the sidelines," said Michael Pearce, chief US economist at Oxford Economics. "The accompanying projections suggest the key motive for raising rates was risk management," Pearce said in comments e-mailed to MT Newswires. "We don't think this is the beginning of another major tightening cycle and markets have too much tightening priced in over the coming year." Policymakers raised their 2026 projections for PCE headline and core inflation to 3.7% and 3.4%, respectively, from 3.6% and 3.3% estimated in June. Their 2027 forecasts for headline and core inflation were unchanged at 2.3% and 2.5%, respectively. The core measure excludes the volatile food and energy components. "Economic activity is expanding at a solid pace," the FOMC said. "While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust." Employment gains have kept pace with the workforce, while the jobless rate remains little changed, the FOMC said. The unemployment rate is seen at 4.1% this year, down from the June estimate of 4.3%. The 2027 and 2028 projections were also lowered, the SEP document showed. The FOMC's next policy meeting is scheduled for Oct. 27-28.