Fed Hikes Rates for First Time in Three Years Amid Stubborn Inflation

The US Federal Reserve has raised its benchmark interest rate by 25 basis points to 3.75-4.00 per cent, ending a prolonged period of policy restraint as renewed inflation pressures force officials to act against stubborn price growth.

This move marks the first increase since July 2023, when the central bank concluded its aggressive post-pandemic tightening cycle. Since then, rates have either been cut or held steady, meaning borrowing costs have not risen for more than three years.

Inflation remains above the Fed's 2 per cent target, driven partly by higher fuel and energy prices. Analysts say the expected hike underscores policymakers' determination to restore price stability even at the risk of slower economic growth.