US Fed hikes rates for first time since 2023 as inflation stays sticky

The US Federal Reserve raised its interest rate by 0.25 percentage points to 3.75%–4% on September 16, its first rate hike since July 2023. The 12-member Federal Open Market Committee voted unanimously, saying inflation remains too high and that the increase is intended to help bring inflation back toward the Fed’s 2% target.

The Fed slightly raised its economic growth forecasts for 2026 and 2027 and lowered its unemployment projections to 4.1%. However, it expects inflation to remain elevated at 3.7% in 2026, above its previous forecast.

Fed Chair Kevin Warsh said the economy is strong enough to handle the increase but did not commit to future rate hikes. The decision also came amid pressure from President Donald Trump for lower interest rates, with Warsh emphasizing that the Fed would remain independent.

Markets reacted negatively after the announcement, with major US stock indexes falling, while the dollar and some Treasury yields increased. Analysts said the decision suggests further rate hikes could still happen before the end of 2026, although some economists argue that current inflation is being driven more by temporary supply shocks than strong domestic demand. Credit : CGTN