WASHINGTON (AP) – The Federal Reserve raised its benchmark interest rate Wednesday for the first time since 2023 in an effort to quell stubbornly-high inflation, a move that could spur a sharp response from the White House.
The quarter-point increase lifts the Fed’s key rate to about 3.9% and, over time, could result in higher borrowing costs for mortgages, auto loans, and credit cards. In a set of quarterly projections, the Fed also signaled that its rate-setting committee expects to hike rates a second time later this year to 4.1%.
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“Today’s policy action will support a timelier return” to the central bank’s 2% inflation goal, the Fed said in a statement.
The move comes as Americans are already struggling with high costs for groceries, gas, and housing. Affordability has taken on a leading role in the upcoming midterm elections, just seven weeks away.
The rate hike is a surprising turnaround for Fed Chair Kevin Warsh, who was appointed by President Donald Trump and took over the top job in May. Warsh often suggested last year when under consideration by Trump that the Fed could reduce its key rate, echoing the president’s call for lower borrowing costs.
This story will be updated.
