Fed Hikes Rates Amid Elevated Inflation Concerns

The Federal Reserve raised interest rates by a quarter of a percentage point to between 3.75% and 4%, in line with expectations.

The decision was made despite President Donald Trump's promise to lower prices during his term, but the central bank cited factors such as global import tariffs, an energy shock, and capital spending from the artificial intelligence boom keeping price pressures high.

New Fed Chief Kevin Warsh said that when it comes to lifting rates, 'inflation remains elevated' and that today's policy action will support a timely return to the 2% goal.

Market bets on a rate hike at the next meeting in late October ticked higher to 56.5%, according to CME Group's FedWatch Tool.

The Fed's new policy statement shows a central bank opening the door for tighter monetary policy through next year, with the policy rate rising to the 4% to 4.25% range by the end of this year and ending 2027 at the same level.