The 25-basis-point increase comes despite the US president\u2019s repeated demands for lower borrowing costs<\/p>\n
The US Federal Reserve has raised interest rates despite US President Donald Trump\u2019s repeated demands for lower borrowing costs, as stubborn inflation continues to weigh on the world\u2019s largest economy.
\nThe Fed hiked its benchmark rate by 25 basis points to 3.75%-4% on Wednesday in a unanimous vote, marking the first increase since 2023 and the first policy change under Chairman Kevin Warsh.
\nThe regulator said economic activity was expanding \u201cat a solid pace,\u201d while inflation \u201cremains elevated.\u201d
\nThe move had been widely expected. Some 85% of economists surveyed by Reuters after the latest inflation data had forecast a quarter-point increase, while a narrow majority expected at least one more hike by the end of March 2027.
\nThe decision comes after inflation showed renewed signs of pressure. US consumer prices rose 3.4% year-on-year in August and 0.4% from the previous month, with gasoline prices jumping 3.9%, according to the US Bureau of Labor Statistics.
\nPrice pressures have been fueled in part by higher energy costs linked to the Iran war, while tariffs have also added to inflation concerns. Higher interest rates are intended to slow price growth by making borrowing more expensive, which tends to reduce spending by consumers and businesses.
\nThe Fed has a long-term inflation target of 2%. Warsh said last month that the goal was \u201cfirm\u201d and \u201cfixed,\u201d arguing that inflation remained too high and that the central banking system\u2019s main focus should be on prices.
\nThe labor market has remained relatively stable, with unemployment at 4.1% in August and employers adding 162,000 jobs. Growth has slowed, however, with GDP expanding at an annualized rate of 1.5% in the second quarter, down from 2.1% in the first.<\/p>\n
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The rate increase could make borrowing more expensive for US households already facing higher prices, according to Yung-Shin Kung, chief investment officer at Mast Investments. He said that lower-income consumers could be hit particularly hard, as they face both elevated prices for essentials such as food and housing and higher costs for servicing debt.
\nTrump repeatedly attacked former Fed Chair Jerome Powell for refusing to deliver the steep rate cuts he sought, calling him a \u201cmoron\u201d and a \u201cnumbskull.\u201d He nominated Warsh as Powell\u2019s successor in March, with Warsh taking over the Fed in May. The latest decision now puts him at odds with the president.
\nLower rates would also cut borrowing costs on the US national debt, which has topped $40 trillion. On Sunday, Trump renewed his pressure on the Fed, saying the US should have \u201cthe lowest interest rate in the world\u201d regardless of inflation or other economic data.
\nWarsh had previously backed higher rates to curb inflation, but shifted toward Trump\u2019s position on lower borrowing costs before taking over the Fed and called for \u201cregime change\u201d at the central bank. Last month, however, he stressed that the Fed must be confident inflation is moving toward its 2% target \u201cclearly and at sufficient speed,\u201d warning that otherwise, \u201cwe have work to do.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The 25-basis-point increase comes despite the US president\u2019s repeated demands for lower borrowing costs The US Federal Reserve has raised interest rates despite US President Donald Trump\u2019s repeated demands for…<\/p>\n","protected":false},"author":1,"featured_media":38282,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":[],"rop_publish_now_history":[],"rop_publish_now_status":"pending","footnotes":""},"categories":[4,6,3],"tags":[],"class_list":["post-38281","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-environment","category-politics"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t