US interest rates raised for first time in three years

The Federal Reserve has raised US interest rates for the first time in over three years, signaling a move to combat persistently high inflation. The decision, made unanimously by the Fed, follows President Donald Trump's call for lower rates. Fed Chair Kevin Warsh defended the hike, stating that inflation has been "too high and has been for too long".

The move could make borrowing more expensive, yet could also offer better returns for savers. Warsh noted that while the Fed leadership is optimistic, inflation remains a significant issue. The Fed's target for inflation is 2%, a level that has not been met for over five years. Higher rates can discourage spending and stimulate saving, but can also hinder economic growth if they are too high.

Warsh emphasized that the central bank cannot control individual price levels, but it can work to prevent inflation from spreading across the economy. The Fed's decision comes amid rising fuel prices due to the US-Israel war with Iran, which has driven up the cost of goods and services. Democrats have criticized the rate hike, arguing it will make loans costlier and burden more Americans with debt.

However, many economists believe the Fed will raise rates further this year and next, with the hope that inflation will ease and return to the Fed's target by 2029.