Fed Raises Rates

The Federal Reserve raised interest rates for the first time in three years in a unanimous decision on Wednesday, with central bankers now seeing a second hike this year to arrest sticky inflation.

Rate Hike Details

The Federal Open Market Committee voted to raise its benchmark interest rate to the range of 3.75% to 4% from 3.5% to 3.75%, the first rate hike since July 2023.

Fed Chair Statement

Fed Chairman Kevin Warsh said, 'We now have data broadly defined that says the economy has indeed strengthened. Underlying growth is higher. Inflation is the problem. Stable prices have been the problem for, now, more than five and a half years.'

“We now have data broadly defined that says the economy has indeed strengthened. Underlying growth is higher. Inflation is the problem. Stable prices have been the problem for, now, more than five and a half years.”

Inflation Projections

Headline inflation is now seen rising 3.7%, compared with 3.6% previously. On a 'core' basis, officials see inflation at 3.4%, compared with 3.3% previously.

Economic Outlook

The Fed expects a slightly stronger economy with GDP growing 2.3% versus 2.2% previously, and unemployment projected at 4.1% down from 4.3%.

Political Context

The Fed's actions come nearly seven weeks before the midterm elections, as President Trump urged the central bank to cut rates, warning he might halt trade with countries maintaining trade surpluses with the US.

Next Steps

Officials project one more rate hike in 2026, with the median of 18 Fed officials expecting to hold rates steady in 2027 followed by one cut in 2028.