Fed Defies Trump, Hikes Interest Rate Amid Stubborn Inflation

The U.S. Federal Reserve defied President Trump's calls to lower interest rates by hiking its key rate for the first time in three years, a move that could lead to higher borrowing costs and fuel inflation concerns.

The quarter-point increase lifts the Fed's benchmark interest rate to about 3.9 per cent and is expected to result in higher borrowing costs for mortgages, auto loans, and credit cards.

Fed Chair Kevin Warsh emphasized that the decision was made to address stubbornly high inflation, which has remained above the Fed's two per cent target for years.

The rate hike comes as Americans are already struggling with high costs for groceries, gas, and housing, an issue that is increasingly prominent in the upcoming midterm elections.