The U.S. Federal Reserve has decided to raise its benchmark interest rate for the first time in three years to combat persistently high inflation, despite Donald Trump's efforts to push for rate cuts.
On Wednesday, 16 Sep 2026 GMT+7, the U.S. Federal Reserve (Fed) increased the country's benchmark interest rate by 0.25% to address prolonged high inflation, a move expected to displease President Donald Trump, who has consistently called for rate reductions.
The Federal Open Market Committee (FOMC) unanimously voted to raise the policy interest rate to a range of 3.75 - 4.00%, citing "rising" inflation and stating that this rate hike will help bring inflation back to the 2% target "more quickly."
According to the Summary of Economic Projections (SEP) released by the Fed on Wednesday, most policymakers expect at least one more rate hike before the end of this year.
The Fed last raised interest rates in 2023, during its ongoing efforts to manage inflation following the COVID-19 pandemic.
Currently, the U.S. economy faces inflation above target for several years, with rising prices influenced by the U.S.-Iran conflict, Trump's tariff policies, and the rapidly growing popularity of AI technology.
Since January, the Fed has held interest rates steady, choosing to assess the impact of the energy price crisis and allowing the full effects of Trump's tariffs on imports to work through the economy.
However, at the July meeting, one-quarter of the voting members dissented from the decision to keep rates unchanged, calling for an immediate rate hike.
Since then, other policymakers, including Governor Waller, have indicated that if inflation does not slow significantly, the Fed may need to intervene further.
On Friday, 11 Sep 2026 GMT+7, the August Consumer Price Index (CPI) was reported at 3.4%, unchanged from the previous month but still well above the Fed's long-term 2% target.
In the SEP report, the Fed raised its forecast for the Personal Consumption Expenditures (PCE) price index, a key inflation measure, by 0.1% to 3.7% by year-end.
"Inflation has spread throughout the economy and is becoming ingrained in consumer and business behavior, which the Fed must counter," said Diane Swonk, KPMG's chief economist, in a note before the Fed's announcement.
Additionally, the Fed raised its year-end GDP growth forecast by 0.1% to 2.3%.
This rate increase is sure to frustrate Trump, who has relentlessly pressured the Fed like no previous U.S. president to cut rates to stimulate economic activity.
The Trump administration launched a criminal investigation into former Fed Chair Jerome Powell, frequently criticized by Trump for not lowering rates as desired. Trump also attempted to remove Fed Governor Lisa Cook, but was blocked by the courts.
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Source:cna