World Economy

Fed Raises Rates to 3.75%-4% in First Hike Since 2023

The Federal Reserve unanimously approved a 25 basis point rate increase Wednesday, marking its first monetary policy shift in more than three years. The FOMC voted 12-0 to lift the federal funds rate to a target range of 3.75%-4%, responding to persistent inflationary pressures including elevated oil prices. The central bank signaled additional hikes remain likely later this year. Committee members' projections indicate 16 of 18 officials expect at least one more increase possible before year-end, with four seeing potential for two additional hikes. The Fed raised its headline inflation forecast to 3.7% and core inflation expectations to 3.1%, pushing its target achievement date to 2029. Markets had priced the move at over 90% probability. The committee expects inflation to decline sharply in 2027 but sees no increases warranted in subsequent years, with rate cuts anticipated starting in 2028.