Are interest rates too high… or too low?

In its September 2026 meeting, the Federal Open Market CommitteeGlossary: The US central bank. It sets the target for short-term interest rates and can buy or sell bonds to steer borrowing costs, aiming for steady prices and maximum employment. (FOMC) raised the Fed funds rate by 0.25%. That's a small amount, but its significance was magnified by heated criticism that the Fed funds rateGlossary: The overnight rate US banks charge each other, held inside a target range set by the Federal Reserve. Nearly every other borrowing rate is priced off it. was already too high.

For investors trying to figure out the direction of interest ratesGlossary: The price of borrowing money, shown as a yearly percentage of the amount borrowed. Savers earn it and borrowers pay it; the Federal Reserve’s decisions push short-term rates up or down., the debate over whether rates need to go higher or lower adds confusion. Some historical perspective might help clear that up.

Before we get into the history, a few words about what the Fed is trying to do with interest rates.

The FOMC is the subgroup of the Federal Reserve that makes decisions about interest rates. Part of the Fed's mission is to balance stimulating growth with keeping inflationGlossary: A general rise in prices over time that shrinks what each dollar buys. The Federal Reserve aims for about 2% a year. under control.