US interest rates raised for first time in three years
7 hours ago
- The US Federal Reserve raised interest rates to 3.75%-4% for the first time in over three years, despite opposition from President Trump who called for cuts.
- Fed Chair Kevin Warsh cited persistently high inflation above the 2% target for over five years as the reason for the increase, calling it a 'sober' and 'responsible' decision.
- Higher rates make borrowing more expensive for loans, mortgages, and credit cards but can improve savings returns, with the aim of slowing price rises.
- The rate hike comes amid rising prices driven by fuel costs linked to the US-Israel war with Iran, affecting affordability for American voters.
- Warsh noted the Fed cannot control individual prices but can prevent inflation from broadening, and lower inflation benefits the least well-off.
- Major US banks raised their prime lending rate to 7%, impacting credit cards and personal loans, while mortgage rates remain below 2023 peaks.
- Most Fed policymakers expect another rate hike by year-end to 4-4.25%, with potential further increases in 2028 and 2029 before cuts begin.
- The move aligns with global central banks like the ECB and Bank of England, which are also raising rates to combat inflation from the Iran war.