U.S. Federal Reserve Raises Fed Funds Rate by 25 Basis Points in First Hike Since July 2023

Fed hikes, signals more

The U.S. Federal Reserve raised its benchmark fed funds rate by 25 basis points to a target range of 3.75% to 4.00% in its first hike since July 2023, reversing course as inflation remained elevated.

The Fed said in its policy statement that "Economic activity is expanding at a solid pace," while also warning that "Inflation remains elevated."

Al Jazeera said the hike came as inflation, driven by soaring fuel prices amid the US-Iran war, continued to weigh on the economy, and it described the move as the first hike in more than three years.

CME FedWatch forecast a 92.3 percent chance of the Fed increasing rates to 3.75 to 4 percent, after a week earlier forecast of 40 percent for a quarter-percent rate increase, according to Al Jazeera.

Al Jazeera also reported that after Wednesday’s hike, Fed officials expected one more rate increase this year and expected rates to remain unchanged through next year.

Reporting for this sectionAl Jazeera

Warsh, Trump, and markets

Fed Chair Kevin Warsh faced questions about the political pressure campaign after the decision, and CNN reported that he refused to address how President Donald Trump might react, saying, "I don’t have anything for you on discussions with the president." CNN also reported Trump’s response on Truth Social, quoting him: "Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR." CBS News said Warsh told reporters, "For more than five years, inflation has been running above target," and it described the unanimous vote as reversing course after the Fed’s earlier stance.

CBS News added that Warsh said policymakers expect to hold rates steady throughout 2027, and it quoted him again on the Fed’s focus on price stability: "The plain fact is that inflation is too high, and has been for too long." In the market reaction described by CoinDesk, Bitcoin was "currently little changed" at $75,700 after the decision, while U.S. stocks were modestly higher and bond yields slightly lower.

Reporting for this sectionCNNCBS News

Inflation fight and fallout

The Fed’s decision was tied to energy-driven inflation pressures, and Al Jazeera reported that benchmark crude oil prices hovered near $109 per barrel on Tuesday while the average price for a gallon of petrol was $4.36, up 14 cents in the past week. Al Jazeera also said the benchmark 10-year Treasury yield broke above 5 percent on Tuesday, hitting 5.02 percent, and it described the yield as a benchmark for borrowing costs including car loans and home mortgages. CBS News said the benchmark rate influences borrowing costs across the U.S. economy, including for credit cards, auto loans and personal loans, and it reported that Warsh said, "The plain fact is that inflation is too high, and has been for too long."

CNN described the immediate stakes for households, saying higher borrowing costs would affect Americans already struggling to afford homes and cars, and it noted that rates on variable products like high-yield savings accounts and credit cards could change. In the longer arc of the Fed’s projections, Al Jazeera reported that Fed officials expected one more rate increase this year and expected rates to remain unchanged through next year, while CoinDesk said the “dots” showed the central bank expects to hike rates one more time in 2026.

Reporting for this sectionAl JazeeraCoinDesk