BREAKING: Federal Reserve Raises Rates for First Time Since July 2023

The Federal Reserve has raised interest rates for the first time since July 2023.

At the end of its two-day Federal Open Market Committee (FOMC) policy meeting on Sept. 16, officials voted to raise the benchmark federal funds rate by a quarter point to a new target range of 3.75% to 4%.

The federal funds rate is a key policy rate that influences business and household borrowing costs.

Financial markets had widely expected the Fed to follow through on a 25-basis-point increase as headline inflation surged due to the war in Iran. Additionally, robust underlying economic conditions have supported the case that the Fed can afford to tighten policy.

Looking ahead, traders believe the US central bank will pull the trigger on two more rate hikes over the next several months to clamp down on inflation. Both major inflation measures – the Consumer Price Index (CPI) and the Fed’s go-to Personal Consumption Expenditures Price Index – have shown the annual inflation rate firmly above 3% and missing the institution’s 2% target for 66 consecutive months.

The Fed followed the same policy path as the European Central Bank, which raised a trio of interest rates last week by a quarter point. Investors have also penciled in a Bank of Japan rate hike later this week.

Chairman Kevin Warsh will convene his next FOMC meeting on Oct. 27.