Fed Flags Higher Interest Rates Ahead Amid Stubborn Inflation

The U.S. Federal Reserve has increased its policy interest rate to a target range of 3.75% to 4%, marking its first hike in three years, as inflation remains above the central bank's two percent target.

Fed Chair Kevin Warsh stated that 'the plain fact is that inflation is too high and has been for too long,' and added that this summer's inflation readings do not indicate an improvement in underlying trends.

Economists predict further rate hikes, with TD Economics director Thomas Feltmate noting that the Fed's decision was widely anticipated due to higher oil prices and August's hot inflation reading of 3.4%.

Feltmate suggests another quarter-point hike by December, which would 'largely undo last year's insurance cuts' and move the policy stance into a more restrictive setting.