Fed Raises Interest Rate to Combat Inflation Despite Trump Pressure
The U.S. Federal Reserve raised its benchmark interest rate for the first time since July 2023, increasing borrowing costs for consumers and putting pressure on President Donald Trump's economic policies.
The Fed's decision was unanimous, with policymakers projecting another quarter-point hike by the end of this year to combat resurgent inflation caused by the war in Iran. The federal funds rate now targets a range of 3.75 to 4 percent, up from 3.50 to 3.75 percent.
Inflation has been above the Fed's 2 percent target for more than five years, and the latest data showed consumer prices rising 3.4 percent in August compared with a year ago. The Fed's focus on price stability is now at odds with Trump's demand for lower interest rates to stimulate economic growth.
Fed Chairman Kevin Warsh said the central bank's decision was necessary to deliver price stability, which he believes is foundational to economic growth. This move comes as Trump's approval ratings are sagging ahead of November's midterm elections.