WASHINGTON, United States: The Fed rate hike lifted the federal funds target range by 0.25 percentage points to 3.75%-4% on Wednesday, marking the central bank’s first increase since 2023.
The Federal Reserve said the decision was unanimous. Its quarterly projections also indicated that policymakers expect another increase later in 2026.
Federal Reserve Chairman Kevin Warsh said inflation remained too high and had exceeded the central bank’s target for more than five years.
The Consumer Price Index rose 3.4% in August, compared with the Fed’s 2% inflation goal. Warsh said policymakers did not expect an aggressive tightening cycle and anticipated holding rates steady through 2027.
Michael Pearce, chief U.S. economist at Oxford Economics, also said he did not view the move as the start of another major sequence of increases.
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President Donald Trump renewed his call for lower rates after the decision, saying on Truth Social that U.S. interest rates should be 1% or less. Warsh declined to discuss any conversations with the president.
Stocks weakened after Warsh reiterated the Fed’s focus on inflation. The Dow Jones Industrial Average fell 631 points, or 1.2%, to 51,462, while the S&P 500 lost nearly 0.4% and the Nasdaq finished roughly flat.
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Higher policy rates can raise borrowing costs on variable-rate products such as credit cards and new loans, though the effect of a single quarter-point increase may vary by product.
