Federal Reserve Hikes Interest Rates Amid Inflation Concerns

The US Federal Reserve raised interest rates by a quarter percentage point to a range of 3.75% to 4% on September 16, marking the first such move in three years.

This decision aims to combat further gains in inflation, particularly due to higher energy prices resulting from the Middle East crisis and other factors.

Higher interest rates make borrowing more expensive and saving more attractive, which cools spending and investment, thereby slowing price increases.

Fed Chairman Kevin Warsh attributed the tighter monetary policy to strong US economic and jobs growth, alongside price pressures not just rooted in oil prices or import tariffs.

Analysts expect additional rate hikes, with UOB economists predicting two more in December and the first quarter of 2027.