The US Federal Reserve has increased its benchmark interest rate for the first time since 2023 in an attempt to combat persistent high inflation.
In a significant move, the United States Federal Reserve raised its key interest rate for the first time since 2023. The central bank's decision marks an effort to lower stubbornly high inflation, which has been causing concern among American households struggling with increased costs of living. This quarter-point increase lifts the Fed’s key rate to approximately 3.9 percent, potentially resulting in higher borrowing costs for mortgages, auto loans, and credit cards over time.
In a set of quarterly projections, the Fed signalled that another interest rate hike could occur later this year, pushing the rate up to 4.1 percent. This decision comes as inflation, according to the Fed’s preferred measure, was 3.7 percent in July 2022 compared to the same period in 2021, a significant increase from 2.3 percent in April 2021.
Following the announcement, Chair of Federal Reserve, Kevin Warsh, emphasised that the economy has shown signs of gathering speed since the central bank decided to keep rates unchanged in late July. Warsh noted that inflation remains persistently above the Fed’s 2 percent target and there is little sign it is cooling. He also mentioned renewed combat between the US and Iran as a factor contributing to the decision to support rate hikes, due to its impact on gas prices.
US President Donald Trump has responded to this decision with calls for lower interest rates. In a post on Truth Social, Trump asserted that the nation warrants cheaper credit, suggesting interest rates should be 1 percent or less.
Source:
Akashvani News
