The Federal Reserve raised interest rates for the first time in three years Wednesday to arrest sticky inflation as renewed tensions in the Middle East drive oil prices higher and raise concerns about broadening price pressures.
The central bank voted in a unanimous decision to raise its benchmark interest rate to the range of 3.75% to 4% from 3.5% to 3.75%, marking the first rate hike since July 2023.
Fed officials reaffirmed in their policy statement that inflation remains elevated, in part reflecting the increase in energy prices due to dislocations in supply from the Iran war as well as tariffs. The statement again said, “the committee will deliver price stability.”
The Fed’s actions come nearly seven weeks before the midterm elections, at a time when President Trump has urged the central bank to cut rates, warning he might otherwise halt trade with countries maintaining trade surpluses with the US. Treasury Secretary Scott Bessent has similarly argued that recent inflation reflects a temporary supply shock from higher oil prices and tariffs that are washing through. Bessent maintains that the Fed should look through these passing factors rather than raising rates, as inflation will eventually decline on its own.
Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance, she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.
Click here for the latest economic news and indicators to help inform your investing decisions
Read the latest financial and business news from Yahoo Finance