US Fed raises rates for first time in three years amid inflation concerns

US Federal Reserve raised its benchmark interest rate by a quarter percentage point Wednesday, its first increase since July 2023, as policymakers moved to combat persistent inflation.

The Federal Reserve said the unanimous decision pushed the target range for federal funds up to 3.75%-4%. The central bank also signalled another increase may come before the end of the year in its latest economic projections.

Fed Chair Kevin Warsh said inflation remained above the central bank’s 2% target and that policymakers needed to act to restore price stability.

“The plain fact is that inflation is too high and has been for too long,” Warsh said, according to The Associated Press.

Borrowing costs for things like mortgages, auto loans and credit cards are likely to rise over time, but the rate increase could mean higher returns for savers.

The move was announced as consumer prices remained high, with inflation running at 3.4% in August from a year earlier. The Fed said economic activity was rising at a solid pace and domestic spending was holding up.

The move was also the first under Warsh, who took over as Fed chair in May.