What is Monetary Policy: How the Federal Funds Rate Works and Why It Moves

The Federal Reserve raised its target range for the federal funds rate by 25 basis points in September 2026, to 3.75 to 4.00 percent, per the Board's open market operations table. One committee vote moved the cost of overnight borrowing for every bank in the country. That single number then works through the economy in slow motion. It shapes what banks pay depositors and charge borrowers. The path from a closed-door meeting to a monthly statement runs through a few fixed channels. What Is Monetary Policy and Who Runs It? Monetary policy is the set of actions a central bank takes to influence the availability and cost of money and credit, per the Federal Reserve's own definition. Congress assigned that job to the Fed in the Federal Reserve Act of 1913. A committee inside the system, the FOMC, makes the key decisions. The Federal Open Market Committee has twelve voting members.

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