The US Federal Reserve has raised rates for the first time since 2023 as chair Kevin Warsh defied US president Donald Trump’s calls for lower borrowing costs and tries to curb the jolt of inflation sparked by the Iran war.
The Federal Open Market Committee (FOMC) voted unanimously to increase the benchmark federal funds rate by a quarter point to a 3.75 per cent to 4 per cent range, in line with Wall Street’s expectations.
The FOMC said the rise “will support a timelier return” of inflation to the Fed’s 2 per cent target – a goal it has missed for 5½ years.
“The committee will deliver price stability,” it added.
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The decision comes as Warsh and other rate-setters attempt to stop the boom in energy prices ignited by the Middle East conflict from morphing into a wider inflation crisis. The European Central Bank raised its rates last week.
It comes just months before midterm elections in the US in which affordability will be a major issue among voters. Ahead of the meeting, investors had priced in a more than 90 per cent chance of a rate increase after the closely watched consumer price index reading for August signalled progress on returning inflation back to the Fed’s goal had stalled.
A fresh set of interest-rate projections, also published on Wednesday, indicated most of the committee anticipate another quarter-point rate rise before the end of the year. – Copyright The Financial Times Limited 2026
