Fed Hikes Interest Rates Amid Elevated US Inflation

The US Federal Reserve has approved its first interest rate increase since 2023, citing elevated inflation rates. The decision was made by a unanimous vote of 12-0 and aims to support the dual mandate of maximum employment and price stability.

The benchmark interest rate was raised by a quarter percentage point to 3.75-4 percent, as stated in the Federal Open Market Committee's (FOMC) statement on Wednesday. The committee noted that economic activity in the US is expanding at a solid pace, with domestic spending remaining resilient despite elevated uncertainty partly linked to geopolitical developments.

The FOMC also emphasized that inflation remains elevated and that its policy action will support a timely return to the Committee's 2 percent goal. The Fed remains committed to achieving price stability, with its inflation target set at 2 percent.