The US Federal Reserve raised interest rates for the first time in more than three years on Wednesday, prioritising inflation control despite repeated calls from President Donald Trump for faster rate cuts, reports Al Jazeera.
The Federal Open Market Committee (FOMC) unanimously increased its benchmark rate to 3.75 per cent-4 per cent from 3.5 per cent-3.75 per cent, marking the Fed’s first hike since July 2023 and first policy change since December 2025.
Fed Chair Kevin Warsh called the move a “sober and responsible” decision, saying inflation had remained above the central bank’s 2 per cent target for more than five years.
Rising wholesale oil prices linked to the US-Israel conflict with Iran have pushed up fuel costs, adding to household affordability concerns. Warsh said the economy’s resilience allowed policymakers to remain focused on restoring price stability.
The decision intensified a public dispute between the White House and the Fed, with Trump repeatedly urging lower rates. Before the meeting, he posted: “LOWER THE INTEREST RATES… AND FAST!”
After the announcement, Trump backed Warsh but criticised other members of the voting board, saying rates remained too high.
“Interest rates are too high. They’re not appropriate,” Trump told reporters, describing the board as “hostile and political” while acknowledging that Warsh’s single vote would not change the outcome.
Democratic leaders also criticised the decision, with Senate Minority Leader Chuck Schumer warning that higher borrowing costs would add pressure on households.
The rate increase quickly affected lending markets, with major banks including JPMorgan Chase, KeyCorp and BNY raising their prime rates to 7 per cent from 6.75 per cent.
The move is expected to increase borrowing costs for credit cards, personal loans and new mortgages. Existing fixed-rate mortgage holders will largely avoid immediate impact, while new buyers and refinancing borrowers may face higher repayments.
Fed officials signalled that further increases remain possible, with most policymakers expecting rates to reach 4 per cent-4.25 per cent by year-end. Additional hikes could follow before the central bank begins considering rate cuts around 2028.
