Federal Reserve raises rates for first time since 2023, putting corporate treasurers back to work

The Federal Reserve raised its benchmark interest rate on September 16, 2026, for the first time in more than three years. The 25-basis-point increase brought the federal funds target range to 3.75%–4.00%, and it landed with a 12-0 unanimous vote from the Federal Open Market Committee.

The hike is also notable for being the first under Fed Chair Kevin Warsh, who inherited a central bank still navigating the uncomfortable middle ground between sticky inflation and a labor market that refuses to cool.

What pushed the Fed to move

Inflation sits at a projected median PCE of 3.7% for 2026, well above the Fed’s 2% target. Rising energy prices, fed in part by geopolitical instability tied to the Iran conflict, have kept price pressures elevated even as growth has remained solid. Unemployment has stayed low, which gives policymakers room to tighten without fearing they’re kicking an already-stumbling economy.

The last time the Fed hiked was July 2023. In the intervening years, the FOMC cut rates multiple times as inflation appeared to be retreating, then held steady as conditions stabilized.

Policymakers also flagged the likelihood of at least one more hike before year-end. The median projection for the federal funds rate holds at 4.1% into 2027.

Corporate treasurers start renegotiating everything

Negotiations are centering on pass-through rates, the share of the Fed’s rate increase that banks agree to reflect in deposit interest paid to commercial clients. Expectations are running at 60–90% pass-through, which would be meaningful for companies sitting on significant short-term cash positions.

Major banks moved quickly on their end as well. JPMorgan and BNY Mellon both raised their prime lending rates to 7% in response to the Fed’s action. Two-year Treasury yields climbed to 4.7%, which sets a visible benchmark for short-term investment returns and gives treasurers a credible reference point when they push back on low deposit offers.

Money market funds are now priced near 4%, making them an attractive parking spot for corporate cash that might otherwise sit in low-yield operating accounts.