It was expected.

For the first time in three years, the U.S. Federal Reserve has raised interest rates.

Federal Reserve  Chair Kevin Warsh and his team raised its benchmark federal fund rate by a quarter percentage point to  3.75 per cent to 4 per cent. 

All 12 members of the Federal Open Market Committee supported the decision.

This announcement is expected to make President Donald Trump upset as he viewed Kevin Warsh as a key ally who would keep rates low.

In July 2023, the Federal Reserve, then headed by Jerome Powell, raised the rate by 25 basis points to 5.25 per cent to 5.5 per cent.

The Dow fell 450 points after the Fed announcement today.

As the Fed looks to contain rising inflation, borrowing costs in America will now be higher.

With oil prices now in excess of US$100 a barrel and no end in sight for the conflict in Iran, the U.S. economy will be impacted. The cost of living for Americans is rising. Diesel is now at $6 a gallon. 

’The plain fact is that inflation is too high and has been for too long. This summer’s inflation readings do not tell me that underlying trends have meaningfully improved,” said Warsh.

Other Central Banks across the world are now expected to increase their rates.

Earlier today, the Federal Reserve put out a statement which read: “ The Committee decided to raise the target range for the federal fund rate by 1/4 percentage point to 3-/4 to 4 per cent in support of the Federal Reserve’s dual mandate. The Committee is continuing its policy of maintaining ample resources in the banking system. 

“Economic activity is expanding at a solid pace. 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 per cent goal. The Committee will deliver price stability.”