Fed Raises Rates for First Time in Three Years Amid High Inflation

The U.S. Federal Reserve has raised interest rates for the first time in three years to combat stubbornly high inflation. The quarter-point increase lifts the Fed's key rate to about 3.9 per cent, which could lead to higher borrowing costs for American mortgages, auto loans, and credit cards.

According to the Fed's preferred measure, inflation was 3.7 per cent in July compared with a year earlier. The move comes as Americans are already struggling with high costs for groceries, gas, and housing, making affordability a pressing issue ahead of the upcoming midterm elections.

Economists say Canada is not facing the same pressure to raise rates as the U.S., despite also experiencing rising inflation driven by energy prices due to the war in Iran. The pace of inflation held steady at three per cent in August above the Bank of Canada's two per cent target.