US Federal Reserve raises interest rates for the first time since 2023

Kevin Warsh at the Federal Reserve in in Washington in July. Photograph: Evelyn Hockstein/ReutersView image in fullscreenKevin Warsh at the Federal Reserve in in Washington in July. Photograph: Evelyn Hockstein/ReutersFederal ReserveUS Federal Reserve raises interest rates for the first time since 2023Trump urges lower rates after central bank agrees increase by quarter-percentage point to range of 3.75% to 4%

The US Federal Reserve voted to raise interest rates on Wednesday for the first time since 2023 as the central bank continues to fight to tamp down inflation.

The Fed’s open market committee voted unanimously to raise its benchmark interest rate by a quarter-percentage point to a range of 3.75% to 4%. This is the first time the Fed has raised rates since July 2023 and potentially sets Kevin Warsh, the current Fed chair, on a collision course with Donald Trump.

“The plain fact is that inflation is too high and has been for too long,” Warsh said on Wednesday. “This summer’s inflation readings do not tell me that underlying trends have meaningfully improved.”

After the announcement, Trump said in a Truth Social post that interest rates should be 1% or less and criticized the US trade deficit. Trump said the US would make “at least 1.5 Trillion Dollars a year” if it were to stop trading with countries with which it has a deficit.

Though Warsh acknowledged changing geopolitics, he avoided calling out the US-Israel war with Iran by name.

“There’s no hiding from hotspots around the world, and our judgment about what is the most likely or least likely of the geopolitical situation has changed,” he said.

Warsh also declined to answer questions about how Trump would react but reiterated that Fed independence was “a two-way street”.

“We will let people that do trade policy and fiscal policy stay in their lane. That is the way we can stand up here and call them the way we see them,” he said.

New projections showed a majority of officials penciled in another rate hike before the year’s end, with four officials predicting the Fed’s benchmark interest rate would reach a range of 4.25% to 4.5% by the end of the year.

And though estimates on the country’s economic growth and unemployment rate were upbeat, Fed officials believed it would take roughly until 2029 for inflation to reach its 2% goal.

At its last meeting in late July, the open market committee voted 9-3 to maintain rates, the first time in 10 years that so many members shared dissent on a policy decision. Since then, the US and Iran have renewed attacks against each other, driving up the Brent crude benchmark to its highest levels in month.