Fed Rate Hike Triggers Fears of Economic Pain

Federal Reserve officials are pointing to global events as a major reason for their decision to raise interest rates. Last week, the Fed lifted its benchmark rate by a quarter-point to about 3.9%, and it expects to keep rates unchanged next year.

Susan Collins, president of the Federal Reserve Bank of Boston, said that the renewal of combat in the Middle East in August was a key reason she supported raising borrowing costs. She noted that geopolitical developments suggest additional pressures on energy prices could continue.

Austan Goolsbee, president of the Chicago Fed, also spoke about inflation pressures arising from supply shocks, such as the war in Iran, as well as solid business and consumer spending.