US Fed Hikes Rates Amid Ongoing War and Soaring Energy Costs

The US Federal Reserve has raised its benchmark interest rate by 25 basis points for the first time since July 2023, in an effort to combat persistent inflation and higher energy costs. The decision was made at a meeting of the Federal Open Market Committee (FOMC), which unanimously agreed on the increase.

The federal funds target range has been raised to 3.75-4 percent, reversing the easing cycle that began in 2024. According to the FOMC statement, 'inflation remains elevated' and the policy action is intended to support a return to the committee's 2 percent inflation goal.

The rate hike comes as the US economy faces renewed inflationary pressure from the ongoing conflict between the US and Iran, which has pushed up energy prices. Gasoline prices are averaging about $1 per gallon above last year's levels, while diesel recently reached a record high of $6.31.

Most officials expect the benchmark rate to increase further, with some estimating that inflation could take until around 2029 to return to the central bank's target. The decision may put Fed Chair Kevin Warsh at odds with President Donald Trump, who has repeatedly stated that the US should have lower rates than any other country.