Fed Raises Rates Amid Inflation Concerns
The US Federal Reserve raised its benchmark interest rate by a quarter percentage point on September 16, marking its first rate hike since July 2023. The federal funds rate is now in a range of 3.75%-4.00%, up from 3.50%-3.75% previously.
The Fed's decision was unanimous, with all 12 voting members supporting the rate hike. This move puts US monetary policy back on a tightening track, despite repeated calls from President Donald Trump for rate cuts ahead of the November 3 midterm elections.
According to Fed Chair Kevin Warsh, 'inflation has been too high and has lasted too long.' He emphasized that the US economy remains fundamentally strong and is at full employment, with an unemployment rate of 4.1%. Warsh also stated that the strong financial markets and broader economy can absorb the impact of higher rates.
The Fed's dot plot released on September 16 suggests another quarter-point hike may be possible before the end of the year. Out of 18 officials who submitted rate projections, 12 expected one more hike this year, while four projected two more. Only two officials expected rates to remain unchanged for the rest of the year.