Fed raises key interest rate by quarter point in 1st hike since July 2023

The U.S. Federal Reserve increased its key interest rate by a quarter point on Wednesday, the first such hike since July 2023, in response to ongoing inflation and soaring oil prices. During the two-day Federal Open Market Committee (FOMC) meeting, the Fed opted to raise the rate to the 3.75-4.00 percent range, despite U.S. President Donald Trump's warning that he might cease trading with nations experiencing trade surpluses with the United States unless the central bank reduces interest rates.

This move widened the gap between South Korea's and the U.S.'s key interest rates by up to 1 percentage point. Prior to the FOMC meeting, fresh data fueled apprehensions about price pressures. On Friday, the Bureau of Labor Statistics announced that the core consumer price index, which excludes food and energy costs, grew by 0.3 percent month-over-month, exceeding expectations by 0.1 percentage point.

This week's interest rate hike proved a setback for Trump, as he had persistently urged the central bank to lower borrowing costs to stimulate the economy, particularly in the lead-up to the November midterm elections where control of Congress is at stake.