The Federal Reserve's September 2026 decision to raise the federal funds target range by 25 basis points to 3.75-4.00%—its first hike since 2023—reflects elevated inflation pressures, with August CPI at 3.4% year-over-year and core PCE projections revised higher to 3.4% for 2026. The updated Summary of Economic Projections shows a median endpoint of 4.125% for both 2026 and 2027, implying one additional hike this year and a pause thereafter, supported by solid GDP growth forecasts around 2.3% and a stable 4.1% unemployment rate. Markets price in roughly an 88% probability of at least one more tightening before year-end, with the next FOMC meetings on October 28 and December 9 serving as key catalysts. Treasury yields and fed funds futures have adjusted accordingly, embedding a higher terminal rate path than earlier in the year.