Fed Holds Rates Steady, Signals Two Cuts Before Year End
The Federal Reserve kept its benchmark rate at 4.00 to 4.25 percent on September 17 but penciled in two quarter-point cuts before December, the first explicit signal of easing since March.
By Priya Kanth, Business & Economy
· 2 min read · Updated
Key Takeaways
- •The Fed held rates at 4.00 to 4.25 percent on September 17 but signaled two quarter-point cuts by December.
- •Two of twelve voting members dissented in favor of an immediate cut.
- •Inflation ran at 2.6 percent year over year in August, down from 3.1 percent a year earlier but above the Fed's 2 percent target.
- •Markets priced a 71 percent chance of an October rate cut as of September 18.
The Federal Reserve held its benchmark interest rate at 4.00 to 4.25 percent on September 17, but its updated projections show a majority of officials now expect two quarter-point cuts before the end of 2026, the clearest signal of easing the central bank has given since March.
The decision was not unanimous. Two of the twelve voting members dissented, both preferring an immediate quarter-point cut, according to the meeting statement.
Who wins, who loses
The Short Answer
Borrowers with variable-rate debt, credit cards, adjustable mortgages, small business lines of credit, are likely to see modest relief if the projected cuts happen in October and December. Savers holding cash in high-yield accounts, currently averaging around 4.3 percent, will see that yield compress as the Fed cuts.
The average 30-year fixed mortgage rate, which tracks the 10-year Treasury more than the Fed's overnight rate, ticked down to 6.42 percent this week from 6.58 percent a month ago, largely because markets had already priced in today's decision.
4.00 to 4.25%
current federal funds rate target range
Down from a peak of 5.25 to 5.50 percent in 2023 and 2024, this is the lowest range since December 2022.
The Fed chair's press conference language leaned cautious. Officials cited inflation running at 2.6 percent year over year in August, above the Fed's 2 percent target but down from 3.1 percent a year earlier, as the reason for a gradual approach rather than a faster cut.
“Two cuts penciled in is not a promise. It is a forecast that changes with every jobs report between now and December.”
What happens next
The Fed's next two meetings are scheduled for October 28 to 29 and December 9 to 10. Futures markets priced in a 71 percent probability of a cut at the October meeting as of September 18, according to CME Group's FedWatch tool.
For small businesses carrying variable-rate loans, a full half-point of cuts by year end would lower payments on a typical $250,000 line of credit by roughly $1,250 annually. That is real money, but it is smaller than the roughly $3,750 in annual savings the same business would have seen from the cuts markets were pricing in back in January.
- Federal Reserve
- interest rates
- monetary policy
- inflation
Sources
- 01Federal Open Market Committee Statement, September 2026, Federal Reservefederalreserve.gov
- 02Consumer Price Index Summary, August 2026, U.S. Bureau of Labor Statisticsbls.gov
- 03FedWatch Tool, CME Groupcmegroup.com
Corrections
No corrections have been made to this article.
About the reporter
Business & Economy Reporter, Trestlewire
Before I was a journalist, I was an equity research analyst, which means I spent years building spreadsheets nobody outside a trading floor will ever see. That background shaped how I report: I do not trust a business narrative until I have seen the numbers underneath it.
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