Fed Raises Rates 25 Basis Points to 3.75%-4.00%, First Hike After Cutting Cycle

The Federal Open Market Committee raised the federal funds target range by 25 basis points to 3.75%-4.00% on September 16, its first hike following a series of cuts, citing inflation that Chair Kevin Warsh called "too high and has been for too long." The Fed moved all administered rates in lockstep effective September 17: IORB rose to 3.90%, ON RRP to 3.75%, and both the discount rate and Standing Repo Facility rate to 4.00%. The effective federal funds rate (EFFR) is expected to resettle just below the new 3.90% IORB and above the 3.75% ON RRP floor. Before the hike, EFFR printed at 3.63%. The increase raises borrowing costs across the term structure. For freight, higher rates elevate inventory carrying costs and slow rate-sensitive sectors including housing and durable goods. Carriers financing equipment face higher capital costs, accelerating capacity exits among thinly capitalized small operators. A stronger dollar supports import container volumes while pressuring U.S. exports.