The Federal Reserve raised its benchmark interest rate by a quarter point on Wednesday, its first increase in three years, in a unanimous decision driven by persistently high prices.
Key facts
- The Fed raised rates to a 3.75%-4% range from 3.5%-3.75%.
- The decision was unanimous, according to the BBC.
- It is the first rate hike in three years.
- Traders had priced in a better than 90% chance of the quarter-point move, per CNBC.
- The move comes despite Trump's demands for lower rates, Al Jazeera reported.
The Federal Reserve raised its benchmark interest rate on Wednesday for the first time in three years, moving the overnight funds rate up by a quarter percentage point. According to the BBC, the Federal Open Market Committee voted unanimously to increase rates to a range of 3.75%-4%, up from 3.5%-3.75%.
The decision had been widely anticipated by financial markets. CNBC reported that traders had assigned a better than 90% probability that the FOMC would vote to raise the overnight funds rate a quarter point ahead of the announcement.
The 25 basis-point hike marks the first rate increase in three years, Al Jazeera reported. The outlet noted the move comes as inflation continues to weigh on the US economy, with prices remaining stubbornly high.
The unanimous vote came despite President Donald Trump’s demands for lower rates, according to Al Jazeera. The central bank’s action underscores its focus on curbing inflation even amid political pressure.
Al Jazeera also noted that the rate rise arrives ahead of critical midterm elections in the United States, adding political significance to the timing of the Fed’s decision.
The quarter-point increase reverses the direction the central bank had held for the previous three years, signaling a renewed effort to bring price growth under control.
Why it matters
Interest rate decisions by the Federal Reserve ripple through the economy, affecting the cost of mortgages, credit cards, business loans and savings returns. A hike after three years signals the central bank believes inflation remains a pressing concern, and its timing ahead of midterm elections gives the move added political weight.
Frequently asked questions
How much did the Federal Reserve raise interest rates?
The Fed raised rates by a quarter percentage point, or 25 basis points, moving the range to 3.75%-4% from 3.5%-3.75%, according to the BBC.
Was the decision unanimous?
Yes. The BBC and Al Jazeera reported that the Federal Open Market Committee voted unanimously to raise rates.
Why did the Fed raise rates?
According to Al Jazeera, the increase comes as inflation weighs on the economy and prices have remained stubbornly high, despite Trump's demands for lower rates.