Fed Raises Rates to Combat Inflation, Forecasts Higher Interest

The Federal Reserve's Federal Open Market Committee (FOMC) has voted unanimously to raise interest rates by 0.25 percentage points to combat inflation.

This decision marks a change from the July FOMC vote, where only three members supported a 25 basis point increase, while nine others opted to maintain rates.

The FOMC statement emphasized maintaining price stability, a language that was absent from pre-June statements this year. The committee also noted solid economic growth, strong productivity growth, robust capital investment, and steady job gains, but expressed concern over economic uncertainty stemming from geopolitical developments.

Notably, the federal funds rate projections for 2026, 2027, and 2028 are now 30 basis points, 50 basis points, and 50 basis points higher than previously forecasted. This could indicate a concern that inflation will persist in the coming months or even fuel higher long-term inflation expectations.

President Trump has reiterated his threat to cut trade with countries having a trade deficit if the Fed does not lower rates, which would likely exacerbate the very inflation it's trying to combat and make future rate increases more probable.