Fed Hikes Interest Rate to Combat Persistent Inflation

The U.S. Federal Reserve raised its short-term interest rate for the first time in three years by 25 basis points, from a range of 3.5% to 3.75%, to a range of 3.75% to 4%. The decision was made to combat inflation, which has been above the Fed's target of 2% since the beginning of the U.S.-Israel war with Iran in February.

The inflation rate peaked at 4.2% in May and has remained high at 3.4%, according to Consumer Price Index data for August. Long-term bond yields have also increased, driven by inflation fears and heavy government borrowing.

Kevin Warsh, the current Chair of the Federal Reserve, stated that 'the plain fact is that inflation is too high and has been for too long.'