Fed raises rates after three years

The Federal Reserve voted unanimously to raise interest rates by 25 basis points to between 3.75 and 4.00 percent, the first increase since 2023.

Inflation has been too high too long

Fed Chair Kevin Warsh said the rate hike was necessary because inflation has remained elevated for an extended period, well above the Fed's two percent target.

“The plain fact is that inflation is too high, and has been for too long.”

More hikes likely before year-end

The vast majority of Fed policymakers indicated at least one more rate hike would be necessary before the end of 2026, with some expecting two additional increases.

Trump calls it a personal attack

President Trump reacted angrily to the rate hike, calling it a raise against him and accusing the Fed's committee of being hostile and making political decisions.

Trump attacks Fed independence

Since taking office, Trump has launched an unprecedented assault on the Fed's independence, attempting to fire a Fed Governor and launching a criminal probe against Warsh's predecessor.

Inflation pressures from multiple sources

US households and businesses have faced higher-than-target inflation driven by Trump's war on Iran, tariff policies, and the ongoing artificial intelligence boom.

August inflation still above target

The consumer price index came in at 3.4 percent in August, unchanged from July but still well above the Fed's long-term two percent target.

Fed held rates steady since January

The Fed had kept rates unchanged since January while assessing the effects of the Iran war's energy price shocks and tariffs on the broader economy.

Economy strong enough for tighter policy

The Fed raised its GDP growth forecast to 2.3 percent by year-end and noted the economy and labor market have held up well enough to absorb higher interest rates.

Warsh faces political scrutiny

Fed Chair Warsh was named to his position after a contentious Senate confirmation where Democrats accused him of being a puppet for Trump, which he denied.

Midterm elections add political pressure

The rate hike comes as Trump's Republican Party faces a stern test in upcoming midterm elections, with Democrats seeking to control both houses of Congress.

Treasury yields surge past five percent

US stock markets declined on the rate hike news, and 10-year Treasury bond yields surged past five percent as uncertainty about long-term inflation persists.