Fed Takes First Step Against Inflation with Rate Hike

The Federal Reserve has taken its first step in fighting inflation by raising interest rates for the first time in three years. The decision, announced on Wednesday, marks a new front in the central bank's battle against rising prices that are beyond its control.

With inflation at 3.4% year-over-year in August and core inflation still above the 2% target, Fed Chair Kevin Warsh said the rate increase was necessary to bring down inflation in what is otherwise a healthy economy with low unemployment and stable job creation.

The question now facing policymakers is how far interest rates will have to rise to contain inflation without putting unnecessary strain on the economy. While some economists believe that one-off increases are rare, others argue that a 0.25% increase may not be enough to tame a five-year run of high inflation.