Fed Hikes Rates Amid Market Expectations and Trump's Calls for Cuts

The Federal Reserve raised its benchmark interest rate by one-quarter of a percentage point on Wednesday, marking its first increase since 2023. The decision was unanimous among policymakers, with a vote of 12-0. The federal funds rate is now in a range of 3.75% to 4%. This move comes after weeks of market expectations that Fed Chair Kevin Warsh and other policymakers would act to counter inflation.

The increase follows months of pressure on Warsh, who faced competing demands from markets and the White House. President Donald Trump had urged the Fed to cut rates or leave them unchanged, while investors anticipated an increase after Warsh warned that inflation could require higher borrowing costs.

Mortgage rates generally track the 10-year Treasury yield, which reached 5% for the first time in three years in recent weeks. The Fed officials also released updated quarterly projections on Wednesday, which investors will scrutinize for signals about the pace of future rate moves in coming months.