(LEAD) Fed raises key interest rate by quarter point in 1st hike since 2023

The U.S. Federal Reserve increased its key interest rate by a quarter percentage point in a significant move, marking the first hike since July 2023, and signaling further possible increases later in the year due to ongoing inflation and high oil prices. At a two-day Federal Open Market Committee (FOMC) meeting, the Fed voted 12-0 to raise the rate to the 3.75–4.00 percent range, despite President Donald Trump's threat to halt trade with trade-surplus nations if the central bank fails to lower rates.

This decision leaves the gap between South Korea's and the U.S.'s interest rates at up to 1 percentage point. The FOMC members' new median economic projection suggests the federal funds rate will reach 4.1 percent by year-end, up from June's 3.8 percent forecast, hinting at another rate hike this year. Economic data released ahead of the meeting added to concerns of price pressures.

On Friday, the Labor Department's Bureau of Labor Statistics reported a 0.3 percent rise in the core consumer price index, excluding volatile food and energy costs, which exceeded expectations by 0.1 percentage point. The Fed's median projection now anticipates U.S. gross domestic product to grow 2.3 percent this year, up from 2.2 percent predicted in June, and 2.4 percent next year, remaining consistent with the previous forecast.

The Personal Consumption Expenditures (PCE) inflation is projected to reach 3.7 percent by year-end, a rise from June's 3.6 percent forecast, and 2.3 percent at the end of next year, mirroring the previous expectation.