Fed Raises Rates for First Time Since July 2023 Amid Ongoing Geopolitical Tensions

The US Federal Reserve raised interest rates for the first time since July 2023, increasing its benchmark rate by a quarter-percentage point to a range of 3.75% to 4%. This move is aimed at taming inflation, which has been stubbornly high.

Fed Chair Kevin Warsh acknowledged changing geopolitics but avoided calling out the US-Israel war with Iran by name. He emphasized that Fed independence is 'a two-way street' and that officials will not be swayed by external pressures.

Warsh stated, 'The plain fact is that inflation is too high and has been for too long.' The central bank's decision comes as the US economy faces a grim outlook due to high prices. Recent data shows that hourly earnings for employees decreased by 0.1% year-over-year after accounting for inflation.

A majority of Fed officials predict another rate hike before the end of the year, with four officials penciling in a range of 4.25% to 4.5% for the benchmark interest rate by the end of 2026. The ongoing war between the US and Iran has driven up inflation, particularly energy prices.