From Hold to Hike: How the Fed Got From 3.50% to 4.00%

Central banks change direction slowly and then, to the public, suddenly. The 2026 Fed went from holding to hiking in a handful of meetings, and the order of events explains it.

• The fed funds target range was held at 3.50 to 3.75 percent from December 2025 until the September 2026 meeting ^[1].
• Kevin Warsh was sworn in as the 17th Fed chair on May 22, 2026; his first FOMC meeting as chair was June 16-17 ^[1].
• On September 16 the FOMC raised the range by 25 basis points to 3.75 to 4.00 percent in a unanimous 12-0 vote ^[2].
• Over the same period, 12-month CPI inflation ran from 2.4 percent in January to a peak near 4.3 percent in May and 3.4 percent in August (my calculation from BLS indexes) ^[3].

The long hold

Going into the summer, the Federal Reserve was holding its benchmark rate at 3.50 to 3.75 percent, where it had been since December 2025 ^[1]. Strategists expected it to stay there through year-end, with inflation above target and energy prices adding uncertainty ^[1].

A new chair

Kevin Warsh was sworn in as the Fed’s 17th chair on May 22, 2026, ahead of his first meeting on June 16-17 ^[1]. Warsh had signaled a preference for a Greenspan-style approach in which data drive decisions meeting by meeting rather than the Fed broadcasting its intentions, and had questioned whether headline PCE inflation tells the full story ^[1]. He holds one vote among 12 on the committee ^[1].

What inflation did

Calculated from the Bureau of Labor Statistics’ non-seasonally-adjusted index, 12-month CPI inflation was about 2.4 percent in January and February, jumped to roughly 3.3 percent in March, 3.8 percent in April and 4.3 percent in May, then eased to 3.5 percent in June, 3.4 percent in July and 3.4 percent in August ^[3]. That timing matches the oil spike of the spring.

The hike

On September 16 the FOMC voted 12-0 to raise the target range by a quarter point to 3.75 to 4.00 percent. Its statement said inflation remains elevated and that the action would support a timelier return to the 2 percent goal, and it described activity as expanding at a solid pace and job gains as keeping pace with the workforce ^[2].

What was expected at the June meeting

J.P. Morgan’s preview of Warsh’s first meeting as chair gives the backdrop. April’s personal consumption expenditures price index rose 0.4 percent on the month and 3.8 percent over twelve months, with core PCE at 3.3 percent; employers added 172,000 jobs in May (as first reported) and unemployment held at 4.3 percent with the federal funds rate at 3.50 to 3.75 percent ^[1]. The bank’s strategists expected the Fed to keep rates steady through year-end, with inflation running nearly two percentage points above target ^[1].

The things to watch were about communication as much as rates: whether the committee would drop its easing bias (three members had dissented in April over that language), whether the dot plot of rate projections would survive given Warsh’s openly stated skepticism of forward projections, and whether he would keep holding a press conference after every meeting, which he had not committed to ^[1]. His stated priorities were less forward guidance, a data-driven, Greenspan-style approach and a preference for trimmed-mean inflation measures over headline PCE, and he has said inflation is a choice for which the Fed must take responsibility ^[1].

Why it matters

Unanimity is the part worth noticing. A new chair with a reputation for skepticism of the Fed’s habits did not have to force a hike through a divided room; the committee agreed. Whether it is the first of several moves or a one-off is the question the next meetings will answer, and the statement gives no promise either way.

Questions readers ask

When did the Fed raise rates in 2026?

On September 16, 2026, by 25 basis points to a target range of 3.75 to 4.00 percent ^[2].

Who is the Fed chair?

Kevin Warsh, sworn in as the 17th chair on May 22, 2026 ^[1].