Fed Raises Rates to Combat Five-Year High Inflation

The Federal Reserve raised its benchmark interest rate for the first time in three years on Wednesday. The move was seen as a necessary step to combat inflation, which has been above the Fed's target of 2% for five years.

Fed Chair Kevin Warsh said that while the economy is healthy, low unemployment and stable job creation are not enough to justify keeping rates low in the face of high inflation. He noted that core inflation, which excludes volatile food and energy costs, was a cooler 2.4% but still above target.

The Fed's decision comes as it faces uncertainties pushing up prices beyond its control, including oil prices above $100 a barrel and the impact of artificial intelligence on computer chip and equipment prices. While rate hikes won't directly ease supply constraints driving up prices, they're expected to contribute to a slowdown in broader price pressures.