Federal Reserve Hikes Interest Rate to Combat Stubborn Inflation

The Federal Reserve raised its benchmark interest rate for the first time since 2023 to about 3.9% in an effort to combat stubbornly high inflation.

The quarter-point increase could result in higher borrowing costs for mortgages, auto loans, and credit cards.

Fed Chair Kevin Warsh emphasized that the economy has shown signs of gathering speed since the central bank decided to keep rates unchanged in late July, but inflation remains above the 2% target.

Warsh noted that other central banks are hiking interest rates in response to global turmoil and higher gas prices, including the European Central Bank, which raised its key rate last week.