The Federal Reserve raised interest rates by a quarter percentage point and penciled in an additional hike later this year, steps aimed at containing inflation that will test Chairman Kevin Warsh’s relationship with President Donald Trump.
“Today’s policy action will support a timelier return to the committee’s 2% goal,” officials said in a statement following the move Wednesday, referring to inflation.
It was the US central bank’s first rate increase since July 2023.
The Federal Open Market Committee voted unanimously to increase the benchmark federal funds rate to a range of 3.75% to 4%. Stocks rose and US Treasuries held their gains after the decision.
In a new set of rate projections released Wednesday, Fed officials’ median outlook for interest rates at the end of 2026 rose to 4.1% from 3.8%, signaling growing support for a series of rate hikes.
The rate increase comes after the Bureau of Labor Statistics reported last week that core inflation rose at a hotter-than-expected pace in August. That added to growing concern that inflationary pressures may be broadening beyond the temporary effect of tariffs and the Iran war’s impact on energy prices.
Warsh warned last month that inflation was not meaningfully slowing, opening the door to policy tightening. Friday’s inflation report prompted investors to view a hike as a near certainty.
In the committee’s post-meeting statement Wednesday, officials again characterized inflation as elevated, yet also described the economy in positive terms.
“Productivity growth is strong, and capital investment is robust,” officials said. “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
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