&imwidth=800&imheight=600&format=webp&quality=medium "Fed raises rates for first time in 3 years, Kevin Warsh defies Trump as inflation mounts")
The Federal Reserve on Wednesday raised its benchmark interest rates for the first time in three years, in a move aimed at slowing inflation that picked up again last month. The Fed’s hike of 0.25% brings the central bank’s flagship rate to 3.75% to 4.00%.
The Federal Reserve policymakers opted to raise their benchmark for short-term interest rates for the first time since 2023 just days after President Donald Trump said the US should have “the lowest interest rates in the world.”
The Fed’s policymakers unanimously supported the rate hike and signalled one more interest rate hike could come before the end of the year.
“Uncertainty remains elevated owing, in part, to geopolitical developments,” the Federal Reserve statement read. “Today’s policy action will support a timelier return to the Committee’s 2 percent goal.”
The move comes after a more than 75% surge in the price of oil this year, which translated into gas prices soaring more than 45% since the Iran war began.
The fuel prices pushed inflation up to 3.4% as of August, above average US wage growth of 3.1%.
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As of this week, all but two members of the Federal Open Market Committee forecast another rate increase later this year.
The decision comes despite President Trump’s demand for lower interest rates. In early February, Trump said Kevin Warsh would not have gotten the nomination unless he wanted to lower rates.
But the war with Iran changed all of that. Less than four months into the job and Warsh is now presiding over a Fed increasing rates.
The Fed raises rates to tame inflation by making borrowing more expensive, which can lead to less demand and eventually lower prices.
The Fed cannot control every factor behind the stubborn inflation as it has limited influence over factors like tariffs, wars, and the AI buildout.
“Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2% goal,” policymakers said in a statement released alongside the decision. “The Committee will deliver price stability.”
The vote was unanimous among the Federal Open Market Committee’s 12 voting members.
