Fed Hikes Key Rate Amid Inflation Fears, Contradicting Trump's Calls

The US Federal Reserve has increased its benchmark interest rate for the first time in three years. This decision aims to combat stubbornly high inflation, which could lead to higher borrowing costs for mortgages, auto loans, and credit cards.

The key rate has been lifted to about 3.9 per cent following a quarter-point increase. The Fed's quarterly projections also signal that it expects to hike rates again later this year to 4.1 per cent.

Fed Chair Kevin Warsh, appointed by President Donald Trump, had previously suggested the possibility of lowering the key rate. However, he now supports a 'trimmed mean' method of calculating inflation, which is being implemented with this rate increase.