US Federal Reserve lifts rates as inflation and fuel costs persist
The Federal Reserve has raised its benchmark interest rate to 3.75–4 percent, its first increase since 2023, as consumer prices and fuel costs remain elevated.
The US Federal Reserve has raised its benchmark interest rate by 25 basis points to a range of 3.75–4 percent, citing persistently elevated inflation and pressure from soaring fuel prices.
The decision, reported by Al Jazeera, is the Fed’s first rate increase in more than three years and comes weeks before US midterm elections. It also follows repeated calls from President Donald Trump for lower interest rates.
The central bank said economic activity was expanding at a solid pace and domestic spending remained resilient, while uncertainty was elevated partly because of geopolitical developments. It said the policy action was intended to support a return to its 2 percent inflation target.
US consumer prices rose 0.4 percent in August from the previous month and 3.4 percent over the year. Brent crude was near $109 a barrel, while petrol and diesel prices had risen sharply, adding pressure to transport and other costs.
The 10-year Treasury yield also exceeded 5 percent, reaching 5.02 percent. Market expectations had shifted significantly before the decision, with CME FedWatch assigning a 92.3 percent probability to a 25-basis-point increase, compared with 40 percent a week earlier.
The Fed’s quarterly projections indicate one further rate increase this year, although the projection is not a firm commitment. Higher borrowing costs are intended to restrain inflation but may also weigh on economic activity.
