Fed raises rates for first time since 2023 as inflation stays elevated

The US Federal Reserve has raised its benchmark interest rate by 25 basis points, lifting the target federal funds rate to a range of 3.75 percent to 4 percent. The move, announced on Wednesday, is the central bank's first rate increase since July 2023.

In its policy statement, the Fed said inflationary pressures have remained persistent and have been compounded by geopolitical conflicts that are pushing up global energy prices. Against that backdrop, the committee judged that the current stance of monetary policy is not enough to bring inflation back to its 2 percent target.

The decision was taken at the conclusion of the Federal Open Market Committee's two-day meeting. During the gathering, participants submitted their projections for real GDP growth, unemployment and inflation covering 2026 through 2029, as well as for the longer term.

Those projections revealed a committee divided over how much further to tighten. Of the 18 officials, 12 expected one more 25 basis-point increase before the end of the year, four anticipated two additional hikes, and two foresaw no further moves.

The Fed also revised upward both its forecast for full-year economic growth and its expectations for inflation at the end of the year.