Washington, September 17 (TNA) The US Federal Reserve has raised its benchmark interest rate by 25 basis points, marking its first rate increase since 2023 as the central bank seeks to contain persistent inflationary pressures.
The Federal Open Market Committee (FOMC) announced the decision after concluding its two-day policy meeting on Wednesday. The quarter-percentage-point increase has taken the federal funds target range to 3.75%–4%, from the previous range of 3.50%–3.75%.
The decision was approved unanimously by the committee’s voting members. The Fed’s move was widely anticipated by financial markets amid concerns that elevated energy prices, import tariffs and strong investment in artificial intelligence infrastructure could keep inflation above the central bank’s target.
The rate hike is aimed at making borrowing more expensive, thereby moderating consumer spending and business investment and preventing inflation from becoming entrenched. However, higher interest rates could also increase borrowing costs for households and companies and put pressure on economic growth.
The central bank has also signalled that borrowing costs could rise further. Its latest projections indicated that officials see scope for another quarter-point increase before the end of 2026, although future decisions will depend on inflation, employment and broader economic data.
The latest move marks a significant shift in the Fed’s policy stance after a period of rate cuts and subsequent pauses. It is the first increase since July 2023, when the federal funds rate was last raised during the previous tightening cycle.