US Federal Reserve raises key interest rate for first time since 2023

The US Federal Reserve on Wednesday raised its key interest rate for the first time in more than three years, increasing the range by 0.25 percentage points to between 3.75% and 4%, in response to persistently high inflation.

The decision, announced by the board of governors, sets Fed chief Kevin Warsh on a collision course with President Donald Trump, who had called for lower interest rates. The central bank had left rates unchanged for months.

Just under a week ago, the European Central Bank had already raised its key interest rate – for the second time this year – in response to rising inflation caused by the war in Iran.

By tightening monetary policy, Warsh is now likely to have appeased two camps of critics at once.

Some experts had been criticizing him since he took office in May for failing to take concrete steps to achieve the price stability he had prioritized.

There had meanwhile been fears on the financial markets that a sixth consecutive pause in interest rates since December 2025 would have severely damaged the Fed’s credibility.