US Federal Reserve raises rates again amid stubborn inflation and Trump pressure
The United States Federal Reserve has raised interest rates by 25 basis points to a range of 3.75% to 4.00%, in a move aimed at tackling inflation that remains above target. The Federal Open Market Committee voted unanimously on Wednesday, local time, to approve the increase. The decision is the first policy move since the central bank paused earlier this year to assess the effects of tariffs and energy-price shocks.
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Officials said the increase was intended to support a "timelier return" to the Fed's 2% inflation goal. The central bank's latest Summary of Economic Projections showed a majority of policymakers expect at least one more rate hike before the end of the year. The report also said the Fed lifted its forecast for its preferred inflation measure, the Personal Consumption Expenditures price index, to 3.7% by year-end.
The move is likely to intensify political tension with President Donald Trump, who has repeatedly called for lower borrowing costs. It also comes after months of debate inside the central bank over whether inflation was easing quickly enough to justify a pause. In July, a quarter of voting members dissented from the decision to hold rates steady, arguing for an immediate increase.
The decision matters because the Fed's benchmark rate influences borrowing costs across the US economy, including mortgages, business loans, credit cards and government debt. Higher rates can help slow price growth, but they can also weigh on spending and investment if kept in place for too long. The latest move suggests policymakers remain more concerned about inflation than about the risk of tighter credit conditions.
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The broader backdrop includes persistent price pressure in the world's largest economy, with the supplied report pointing to tariffs, energy shocks and artificial intelligence-related investment as factors complicating the outlook. Fed Chair Kevin Warsh was due to hold a press conference after the announcement, which markets will watch for clues about how quickly officials may move again. The central bank has now signalled that policy may need to stay restrictive for longer than some investors had expected.
What remains unclear is whether the projected additional hike will happen before year-end and how markets will react to the new path for rates. Investors will now focus on upcoming inflation and labour market data, as well as any further guidance from the Fed. The next policy meeting will be closely watched for signs of whether officials believe inflation is slowing enough to stop tightening.
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