Why rates are still high

On September 16, the Federal Reserve raised the target range for the federal funds rate by a quarter point to 3.75%–4.00%. In plain English, the Fed is still trying to slow demand enough to bring inflation closer to its 2% goal.

That matters because higher benchmark rates tend to filter through the rest of the economy. Mortgage rates, auto loans and many credit products usually become more expensive when the Fed keeps policy tight.

Infographic showing the federal funds target at 3.75 to 4.00 percent, the 30-year mortgage average at 7.28 percent, and CPI and PCE inflation both at 3.4 percent.
Key borrowing and inflation figures as of early October 2026, based on Federal Reserve, BLS, BEA and Freddie Mac data.

What the latest inflation data say

The Bureau of Labor Statistics reported that the Consumer Price Index rose 3.4% over the 12 months through August. Gasoline prices were one reason: BLS said gasoline rose 3.9% in August and accounted for more than one-third of the monthly increase in overall CPI.

The Personal Consumption Expenditures price index—the inflation measure the Fed often emphasizes—also stood at 3.4% year over year in August. Inflation is well below its post-pandemic highs, but it is still not back to normal.

Where families feel it most

Freddie Mac’s 30-year fixed mortgage average was 7.28% on October 1. That helps explain why buying a home still feels difficult even for households with solid incomes. Existing homeowners also feel the pressure when they refinance, carry home-equity debt or juggle other borrowing costs.

The broader point is that prices do not need to be surging every month for people to feel squeezed. If everyday costs are elevated and borrowing is expensive at the same time, household budgets can still feel tight.