US interest rates raised for first time in three years

In a significant move, the Federal Reserve has raised US interest rates for the first time in over three years, aiming to curb rising prices. The rates were increased from 3.5%-3.75% to 3.75%-4%, signaling potential further hikes. This decision, unanimous among Fed members, was made by Chair Kevin Warsh, who emphasized that inflation has been "too high and has been for too long".

Despite opposition from President Trump, who advocated for lower rates, Warsh defended the choice as a "responsible decision." Higher interest rates make borrowing costlier but can provide better returns on savings. The Fed aims to keep inflation at 2% or below, a target it has been struggling to meet for over five years. This move comes as fuel prices surge due to the US-Israel war with Iran, driving up the cost of goods and services.

Warsh stated that while the Fed cannot control individual prices, it can help prevent inflation from spreading across the economy. He noted that a strong job market and overall economic health supported the decision to focus on stabilizing prices. The higher rates may lead to increased costs for loans and mortgages, potentially affecting Americans' ability to secure new credit or refinance existing debt.

Major banks have already adjusted their prime lending rates accordingly. Federal Reserve officials foresee additional rate hikes this year, potentially reaching the upper end of their 4-4.25% range before beginning cuts in 2028 and 2029, in hopes of bringing inflation back to their target by 2029.