US Federal Reserve Increases Interest Rate First Time Since 2023

The US Federal Reserve has increased its interest rate for the first time since July 2023, raising the benchmark rate by a quarter of a percentage point to a target range of 3.75-4 percent. This decision was made during the Federal Open Market Committee's meeting on September 15-16, following concerns that inflation was still above the Fed's 2 percent target and economic conditions were unfavorable. The rate hike was approved unanimously by all voting committee members.

The Federal Reserve's projections suggest another potential increase of 25 basis points before the end of 2026, depending on future economic data. This move marks a reversal of the rate cuts implemented in 2025, when the Fed lowered borrowing costs as inflation began to ease. Higher US interest rates can have global implications, increasing borrowing costs worldwide and potentially exerting pressure on emerging-market currencies and capital flows. The Iran conflict is also contributing to strains in key factors supporting the US economy.