By Brian French
Quick Answer
The Federal Reserve raised its benchmark rate by a quarter point today to a range of 3.75%–4.00%, its first increase since 2023. For Florida businesses that borrow or lend at scale — real estate, construction, banking, auto dealers — the cost of money just went up modestly. For the majority of Florida businesses that carry little floating-rate debt, the practical effect is close to zero. The hike is best understood as a credibility signal to markets, not a tool that will meaningfully lower the energy-driven inflation now running at 3.4%.
What the Fed Did Today
The Federal Open Market Committee voted Wednesday to raise the target lending rate by 25 basis points to a range of 3.75% to 4%, in a unanimous vote. The move is the first tightening step by the Federal Reserve since 2023, and the first policy change under Chairman Kevin Warsh, who was confirmed in May.
The decision was fully telegraphed. Markets had priced roughly a 93% probability of a quarter-point hike going in, and the odds jumped past 50% in days after Warsh said at Jackson Hole that inflation had not “meaningfully improved.”
The data behind the decision, in one small table:
| Indicator | Latest reading |
|---|---|
| Fed funds target range | 3.75%–4.00% (was 3.50%–3.75%) |
| Headline CPI (August, YoY) | 3.4% |
| Core PCE (July, YoY) | 3.3% |
| Crude oil | Above $100/bbl |
| National diesel | ~$6/gallon |
| 10-year Treasury yield | ~5.0% |
| August payroll gain | 162,000 |
| Unemployment rate | 4.1% |
Headline inflation held at 3.4% year-over-year in August, and diesel prices have risen to $6 a gallon as an end to the Iran conflict appears increasingly distant. Crude is back above $100 as disruptions in the Strait of Hormuz continue to strangle shipping flows, and national average gas prices are up about 36% in a year.
Which Florida Businesses Feel It
A 25-basis-point move is small, but it is not nothing for businesses whose margins run through the credit markets. The prime rate, which floats with the Fed funds rate, moves to roughly 7.00%.
Real estate and construction. Florida developers, homebuilders, and commercial landlords are the most exposed. Construction loans, land loans, and bridge financing are almost always floating-rate. A project carrying a $20 million construction loan pays about $50,000 more per year at the new rate. That does not kill a project, but it tightens pro formas that were already thin after two years of elevated insurance and materials costs. Note that 30-year mortgage rates track the 10-year Treasury, not the Fed funds rate, and the 10-year was already near 5% before today.
Banks and credit unions. Florida’s community banks generally benefit from higher short rates on floating-rate commercial loans, but only if deposit costs do not rise as fast. The pressure point is commercial real estate refinancing: loans written at 4% in 2021 that now reprice at 7% or higher.
Auto dealers, RV dealers, and boat dealers. Floor-plan financing is floating-rate, and consumer auto loans get slightly more expensive. Florida’s large retiree and boating markets make this a visible, if modest, headwind.
HELOC borrowers and small businesses on lines of credit. Rates on home equity lines and bank lines of credit adjust within a billing cycle or two. If you run your business on a $250,000 line, today’s move costs about $625 a year.
Which Florida Businesses Will Barely Notice
If your business does not borrow or lend, today’s hike is a headline, not an event. Restaurants, medical practices, law firms, contractors paid on completion, software companies, tourism operators, and most professional services firms carry little or no floating-rate debt. Their cost structures are driven by wages, rent, insurance, and — right now — fuel and freight.
For those businesses, the diesel price matters far more than the Fed funds rate. A landscaping company in Brandon or a produce hauler out of Plant City is paying $6 diesel today regardless of what the FOMC did.
Does a Quarter Point Actually Slow Inflation?
Not in any measurable way, and the Fed knows it. Monetary policy works through long and variable lags, typically 12 to 18 months, and it works by reducing aggregate demand: fewer home purchases, fewer capital projects, fewer hires. A 25-basis-point change to a $30 trillion economy is a rounding error on demand. Its effect on the price of Gulf crude, Hormuz shipping insurance, or Florida gasoline is zero.
This is the core problem with today’s move. The inflation the Fed is fighting is supply-driven. Two drivers lowered the bar for a hike: continued supply-chain shocks tied to the Iran conflict keeping energy costs elevated, and investor doubt about the Fed’s willingness to keep inflation contained after it held rates in July. Read that carefully: half the stated rationale is about investor perception, not the economy.
Higher rates can, in theory, offset an energy shock by suppressing everything else. That is a blunt trade: you accept slower construction, slower hiring, and a weaker housing market in Florida to lean against an oil price set in the Persian Gulf. Monetary policy is a hammer, and the current inflation is not a nail.
Is Monetary Policy a Poor Tool for Micro-Managing the Economy?
The honest answer is that the Fed itself does not claim to micro-manage. Its dual mandate is broad — price stability and maximum employment — and its one real lever, the overnight rate, is among the least precise tools in economic policy. It cannot target a sector, a state, or an industry. It cannot distinguish a Miami condo developer from a Jacksonville logistics company.
For Florida specifically, this matters. The state’s economy is disproportionately weighted toward interest-sensitive sectors — real estate, construction, tourism financed by consumer credit — so Fed tightening hits Florida harder than the national average even when the inflation is coming from somewhere else entirely.
Should the Fed try at all? The defensible case for today’s hike is narrow but real: inflation expectations. If markets and workers come to believe the Fed will tolerate 3.4% indefinitely, wage demands and pricing behavior adjust, and supply-driven inflation becomes embedded. When markets question the Fed’s reaction function, policymakers have a greater incentive to take a credibility-reinforcing step. The counterargument is equally real: a symbolic hike that cannot reach the actual source of inflation imposes real costs on borrowers to purchase a narrative benefit.
Brian’s Take
Today’s hike is a token gesture, and I mean that descriptively, not dismissively. The Fed moved 25 basis points because the market had priced it, because the July dissents made a hold look weak, and because a new chairman needed to demonstrate he would act. None of those reasons has anything to do with the price of diesel in Tampa.
Having managed money through several Fed cycles, I have watched this pattern before: the central bank responds to a supply shock with demand tools, the tools do nothing to the shock, and the economy pays the tightening cost anyway. The 1970s taught the Fed to fear unanchored expectations, and that lesson is now applied reflexively even when the inflation source is a shipping lane, not a wage-price spiral.
For Florida business owners, the practical guidance is simple. If you borrow on a floating rate, model another 50 basis points and make sure the numbers still work. If you do not, ignore the Fed and watch the Strait of Hormuz. That is where your input costs are being set. And if the war-related energy premium comes off, inflation will fall for reasons that have nothing to do with today’s vote — and the Fed will likely take the credit.
Frequently Asked Questions
What is the new Fed funds rate?
The target range is now 3.75% to 4.00%, up from 3.50% to 3.75%.
Will Florida mortgage rates go up because of this?
Not directly. Mortgage rates follow the 10-year Treasury, which was already near 5%. Expect little immediate change; the bigger driver is the bond market’s view of inflation.
Does the hike affect my SBA loan?
If your SBA 7(a) loan is variable-rate and tied to prime, yes — expect roughly a quarter-point increase at your next adjustment.
Why did the Fed raise rates if energy is the cause of inflation?
Because the Fed cannot control energy prices but can influence inflation expectations. The hike is intended to signal that the Fed will not tolerate 3%+ inflation even when the cause is external.
Will there be another hike in December?
Markets are watching Warsh’s guidance closely. Before today, futures pricing implied a strong chance of at least one more move this year, depending on whether energy prices ease.
What Florida industries benefit from higher rates?
Banks with floating-rate loan books, money market funds, and savers holding cash. Florida’s large retiree population sees higher yields on CDs and Treasuries.
Sources and Further Reading
- Yahoo Finance — Fed meeting live updates: FOMC raises rates 25 basis points in unanimous vote (Sept. 16, 2026): https://finance.yahoo.com/economy/policy/live/federal-reserve-meeting-live-updates-chairman-kevin-warsh-143452661.html
- CNBC — The Fed is likely to raise interest rates as inflation persists; what that means for consumers (Sept. 14, 2026): https://www.cnbc.com/2026/09/14/fed-rate-hike-anticipated-what-it-means-for-your-money.html
- Trading Economics — United States Fed Funds Interest Rate: https://tradingeconomics.com/united-states/interest-rate
- J.P. Morgan Wealth Management via Chase — Will the Fed Hike Rates in September? (Aug. 5, 2026): https://www.chase.com/personal/investments/learning-and-insights/article/september-2026-rate-hike-now-expected-amid-energy-shocks
- Fox Business — Federal Reserve expected to hike interest rates 25 basis points at FOMC meeting (Sept. 15, 2026): https://www.foxbusiness.com/economy/stubborn-inflation-sets-stage-federal-reserve-hike-interest-rates
- CNBC — September Fed decision a coin flip after Warsh’s Jackson Hole speech (Aug. 28, 2026): https://www.cnbc.com/2026/08/28/-september-fed-decision-now-a-coin-flip-as-rate-hike-odds-increase.html
- Cryptopolitan — FOMC Decision Today: energy, CPI, and labor data behind the hike (Sept. 16, 2026): https://www.cryptopolitan.com/fomc-decision-fed-rate-hike-bitcoin/
One note: the FOMC statement and Warsh’s press conference are still fresh, so if he signals a December hike this afternoon, the “Will there be another hike” FAQ is worth a one-line update before publishing. I can also put this in a doc if you’d like.
