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The US Federal Reserve has raised its benchmark interest rate for the first time in more than three years, lifting the target range by 0.25 percentage point to 3.75%-4% amid persistent inflation.
The Federal Open Market Committee approved the increase unanimously on Wednesday, September 16. The Fed said inflation remained elevated and that the move would support a more timely return to its 2% target.
Fed Chair Kevin Warsh said inflation remained a problem, while officials signalled that further rate increases could be needed. The Fed’s latest projections indicate another increase could come later this year.
The decision came despite President Donald Trump repeatedly calling for lower interest rates. Trump criticised the Fed’s move and said rates should be reduced substantially.
Higher interest rates are expected to increase borrowing costs for consumers seeking bank loans, mortgages and credit cards, while potentially benefiting savers through higher returns.
The rate hike marks a shift in US monetary policy after the Fed had kept rates unchanged at its previous meeting. It is the first increase since July 2023.