Federal Reserve lifts US interest rates
US interest rates raised for first time in three years
Wednesday, 16 September 2026
Warm-up
- What happens when borrowing gets more expensive?
- Have you ever compared loan or mortgage offers? Why?
- Where do you notice inflation most in daily life?
Vocabulary
- unanimous
- With everyone involved agreeing to the same decision.
- inflation
- A general rise in prices that makes money buy less over time.
- mortgage
- A long-term loan used to buy a home.
- refinance
- To replace an old loan with a new one, usually to get a better rate.
- forecast
- A prediction about future conditions based on current data.
- independence
- Freedom from control by another person or group.
- discourage
- To make someone less likely to do something.
- lender
- A bank or company that lets people or firms borrow money.
Reading
The US Federal Reserve raised its key rate to 3.75%-4% from 3.5%-3.75%, the first increase in over three years. The unanimous vote came despite President Donald Trump calling for cuts. Fed chair Kevin Warsh said inflation is too high and called the move sober and responsible. He added that strong employment means the bank can focus on stabilising prices near its 2% target.
Higher rates make borrowing costlier for loans, mortgages and credit cards, while saving can become more attractive. Major lenders moved quickly: JP Morgan, KeyCorp and BNY lifted the prime rate to 7% from 6.75%, affecting credit cards and personal loans. Average US mortgage rates are 6.76% for a 30-year deal and 6.09% for a 15-year deal. Many homeowners have fixed-rate loans, so some will not feel an immediate change, though others could refinance.
Warsh stressed the Fed's independence and said rate rises aim to discourage spending so prices cool. Policymakers' forecasts point to another hike this year to 4%-4.25%, possibly 4.25%-4.5% next year, with cuts from 2028-2029. They expect inflation to return to the 2% target by 2029. Other central banks are also tightening: the European Central Bank raised rates last week, and the Bank of England decides next.
Comprehension
- What new target range did the Fed set for interest rates?
- Whose opposition did the rate rise face?
- What did several major US banks do after the Fed's move?
- How can higher rates affect borrowers and savers?
- When do policymakers expect inflation to reach 2%?
Grammar focus
Used to / would
Both describe past habits. Only 'used to' can describe a past state — a situation rather than an action. 'The building used to be a cinema' is correct; 'would be' is not. (Examples constructed.)
- Policymakers **used to be** more cautious before the crisis.
- Banks **would raise** the prime rate quickly after Fed moves.
Grammar exercise
Complete each sentence using 'used to' or 'would'.
- Her family (live) ___ near the old harbour.
- Traders (shout) ___ their prices across the square.
- The journey (cost) ___ far less than it does now.
- Children (swim) ___ in the canal during hot summers.
- Reporters (gather) ___ outside the courtroom each morning.
Discussion
- Should central banks fight inflation even if growth slows? Why?
- How would a rate rise change your spending or saving plans?
- Is it right for politicians to criticise an independent central bank?
- What daily signs would show inflation is easing?
Vocabulary, reading, and exercises with instant feedback