Federal Reserve raises interest rates for the first time since 2023

Sept. 16 (UPI) — The Federal Open Market Committee on Wednesday voted unanimously to raise interest rates by a quarter percentage point, the first increase since 2023.

This change raised benchmark interest rates to 3.75% to 4%. The Federal Reserve has maintained benchmark interest rates in the 3.5% to 3.75% range for three years as it tries to tame inflation to a 2% annual rate.

“Economic activity is expanding at a solid pace,” the committee said in a statement. “While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.

“Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2% goal. The Committee will deliver price stability.”

War in Iran has created a global fuel shortage that is driving up oil prices, which has a trickle-down effect on consumers, and the latest economic measures show inflation remains sticky, threatening to grow more. This combination of conditions increased the likelihood of the central bank raising interest rates.

“The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank,” Kevin Warsh, Federal Reserve chairman, said in an address in Jackson Hole, Wyo., last month. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”

After the announcement, President Donald Trump, who picked Warsh as chairman and has repeatedly called for lower interest rates, posted on social media that interest rates should be 1% “or less.”

“LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!” Trump wrote in a post that also said the United States is ” ‘carrying’ almost every country in the World.”

Oil prices are again on the rise after peace talks between the United States and Iran have fallen apart. An outage on a Saudi Arabian pipeline used to circumvent the Strait of Hormuz has placed additional pressure on the oil trade with the price of Brent crude oil, the international benchmark, at $107 per barrel early Wednesday.

At the gas pump, the United States is seeing an average of $4.36 per gallon for regular grade gasoline on Wednesday, AAA reports.

Wednesday’s Federal Open Market Committee meeting is the first since July, when it again elected to leave interest rates unchanged.

Prices for consumer goods and services were up 3.4% in August over a year prior. The annual rate of inflation was the same in July.