Banking and Finance Law Daily Wrap Up, FEDERAL RESERVE SYSTEM—Fed approves amendments to support FOMC interest rate increase, (Sep 29, 2026)

By A. Bryan Gerepka

Immediate implementation is required to respond to economic data and conditions.

The Board of Governors of the Federal Reserve System has adopted final amendments to Regulation A and Regulation D to approve increases in the interest rates charged on short-term loans and the interest rates it pays on reserve balances held at each Federal Reserve Bank.

The rate increases align with the recent 25 basis point increase in the federal funds target rate to 4 percent, from 3.75 percent, as the Fed seeks to tame inflationary pressures while maintaining ample liquidity in the banking system.

Changes to Regs. A and D. Under Regulation A, part 201, the primary credit rate the 12 member banks charge for short-term loans—typically overnight lending—increased to 4 percent from 3.75 percent. The secondary credit rate, meanwhile, increased to 4.50 percent from 4.25 percent, based on the 25-basis-point increase in the primary rate.

Under Regulation D, part 204, the Fed raised the rate to 3.90 percent from 3.65 percent for interest paid on balances (IORB) held at Federal Reserve Banks or maintained on behalf of eligible institutions. The amendment is intended to enhance the role of IORB in maintaining the federal funds rate in the target range established by the FOMC, the Fed stated.

Immediate effective date. The amendments are effective on Sept. 30, 2026, bypassing the typical notice-and-comment period required under the Administrative Procedure Act. “Notice, public comment, and a delayed effective date would create uncertainty about the finality and effectiveness of the Board’s action and undermine the effectiveness of that action,” the Fed stated.

FOMC. On Sept. 16, 2026, the 12-member Federal Open Market Committee (FOMC) voted unanimously to raise the federal funds target range by one-quarter percentage point to 4 percent from 3.75 percent, tightening monetary policy as inflation remained elevated (see Banking and Finance Law Daily, Sept. 16, 2026). The FOMC said the decision would support a timelier return to its 2 percent inflation goal.

It paired the increase with a continuation of its policy of maintaining ample reserves in the banking system by raising the interest rate paid on reserve balances to 3.90 percent and the primary credit rate to 4 percent. Both changes took effect Sept. 17, 2026.

The policy move came against an economy the FOMC described as continuing to expand at a solid pace. Domestic spending remained resilient, while productivity growth was strong and capital investment robust. At the same time, the FOMC said uncertainty remained elevated, owing in part to geopolitical developments. Those assessments placed the rate increase against continued economic strength rather than a broad weakening in activity. The FOMC’s statement also noted that job gains had kept pace with the workforce, and the unemployment rate had changed little.

RegulatoryActivity: BankingOperations FederalReserveSystem FinancialStability FOMC InterestUsury