US Fed Raises Interest Rate by 25 Basis Points After 3+ Years

The U.S. Federal Reserve (the U.S. central bank) on Wednesday raised its main interest rate for the first time in more than 3 years, increasing the key rate by 25 basis points to a range between 3.75% and 4%.

The decision comes as the central bank battles stubborn inflation fueled by rising energy prices. Some Wall Street analysts also expect one or two more rate hikes in the coming months.

Inflation remains well above the central bank's annual target of 2%, with the consumer price index rising by an annual rate of 3.4% in August.

Kevin Warsh, Chairman of the Federal Reserve (the U.S. Central Bank), said after the bank raised interest rates that the board's main focus will remain on controlling inflation.

According to (Reuters), Warsh stated in a press conference, "So, our primary focus is on the price stability side of our mandate. The plain truth is that inflation is far too high, and has been for a long time. This summer’s inflation readings do not point to a tangible improvement in underlying trends."

He stressed that determining the extent of monetary policy tightening is not an easy matter.

He said in a press conference following the Federal Reserve meeting, "I found it difficult to describe financial conditions as restrictive... What I heard around the discussion table... is that my colleagues also had difficulty describing them that way."

He added regarding today's decision to raise interest rates, "We removed a degree of monetary accommodation, so that financial and credit conditions become more consistent with our ultimate goals."

Kevin Warsh, Chairman of the Federal Reserve (the U.S. Central Bank), said on Wednesday that the rise in bond yields is not attributable to a loss of confidence in the central bank.

Warsh added in a press conference after the latest Federal Reserve meeting that the rise in actual borrowing costs is instead due to the strength of the economy and an increase in capital spending, which has led to greater competition for capital, in addition to geopolitical factors.

Kevin Warsh said the U.S. economy has become stronger since the board's policymakers' meeting in June, with the labor market remaining close to full employment, while inflation trends have shown limited improvement.

It is worth noting that the last time the Fed raised interest rates was in the July 2023 meeting. Since then—until before Wednesday's meeting—it has cut the rate six times, for a total of 175 basis points, or 1.75 percentage points.

In 2025, the Fed cut interest rates three times (a quarter of a percentage point each time), while keeping rates unchanged in five previous meetings.

As for the current year, 2026, the Fed has kept interest rates unchanged for 5 consecutive meetings since the beginning of 2026, at a range between 3.5% and 3.75%.