The Federal Reserve has hiked its key interest rate for the first time in more than three years, delivering a quarter-point rise despite President Trump's call for lower rates. The Fed announced Wednesday that its key rate is rising to a range of 3.75%-4%. The Fed, which is under pressure to tame inflation, said the decision was approved in a 12-0 vote. The last rise was in July 2023, when the Fed hiked the rate to 5.25%-5.5%, the BBC reports. The central bank, which had held the rate steady since December last year, signaled that there will be one more rate hike this year, reports the AP.
- "Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient," the Fed said in a statement. "Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little. Inflation remains elevated."
- Inflation has been above the Fed's 2% target for more than five years, the Wall Street Journal reports. Today's action will support a "timelier return" to that goal, the Fed said. "The Committee will deliver price stability."
A month ago, traders put the odds of a rate hike at just 36%, CNBC reports. What changed? Fed Chair Kevin Warsh's speech at Jackson Hole, stubborn inflation data, a sturdy labor market, and oil prices again topping $100 amid tensions with Iran. The AP calls the decision a "surprising turnaround" for Warsh, who was appointed by Trump and echoed the president's call for lower rates when he was under consideration to replace Jerome Powell.
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