Fed raises rates to 3.75%–4.00% in September

What's happening

On September 16, 2026, the Federal Open Market Committee raised the federal funds target range by a quarter percentage point to 3.75% to 4.00%. The statement said inflation "remains elevated" and that the move will support a timelier return to the Committee's 2 percent goal. The Committee described economic activity as expanding at a solid pace, with job gains keeping up with the workforce and unemployment little changed.

The decision reverses the direction many borrowers had planned around. Floating-rate costs reset almost immediately: the bank prime loan rate moved from 6.75% to 7.00% on September 17, according to the Federal Reserve's H.15 release.

• Target range: 3.75% to 4.00%, up 25 basis points.
• Vote: 12-0.
• Prime rate: 7.00%, up from 6.75%.
• Effective fed funds: 3.88% on September 17–18.

What it means for owners, tenants and investors

Borrowers on SOFR- or prime-based debt, including construction and bridge loans, face higher interest carry right away. Owners with loans coming due should revisit rate-cap costs and debt-service coverage assumptions. For tenants, higher financing costs tend to slow new development, which supports existing buildings' occupancy over time. In Southern California, where land and construction costs are already high, tighter credit is likely to keep new industrial starts limited and favor owners of well-located existing product.

Investors comparing cap rates to borrowing costs should rerun hold-period returns at current rates rather than at the rates assumed earlier in the year. Fixed-rate borrowers are insulated for now, but any refinance, extension or new acquisition will price off the new policy rate and the market's expectations for further moves.

A rate hike changes underwriting math first for floating-rate borrowers, then for everyone who refinances.

What to watch

Upcoming inflation prints and the Committee's next meeting will show whether September was a single adjustment or the start of a longer tightening cycle.

Photo: Joshua Woroniecki / Unsplash.