US Interest Rates Raised for First Time in Three Years
BBC News
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US interest rates have been raised for the first time in more than three years and could be increased further to slow rising prices. The Federal Reserve hiked rates to 3.75%-4% from 3.5%-3.75%, a unanimous decision despite opposition from President Donald Trump, who had called for rate cuts.
Fed Chair Kevin Warsh cited "inflation that is too high and has been for too long" as the reason for the move, calling it a "sober" and "responsible" decision. However, Trump stated on social media that rates "should be 1%, or less, because we are the Best Credit in the World - BY FAR."
Higher interest rates make borrowing more expensive, but can lead to better returns on savings. Warsh acknowledged the delicate balance involved in setting rates, as central banks aim to keep inflation at 2% or below.
He noted that US inflation has exceeded this target for "more than five years". With midterm elections approaching in November, affordability is a top concern for American voters grappling with rising diesel and gasoline prices. Global oil price surges due to the US-Israel conflict with Iran have contributed to these costs.
Warsh emphasized that while the Fed's decision cannot directly affect individual prices, it can help prevent widespread inflation. He pointed to the strong job market as a reason for focus on price stability, noting that those least well off would benefit most from lower inflation.
The Federal Reserve remains independent of the government despite sharp criticism from Trump regarding rate decisions in recent years. The US president appointed Warsh as Fed chair following the departure of Jerome Powell. Trump promptly took to social media after the announcement, calling for lower rates.