Federal Reserve raises benchmark rate by 0.25 percentage point, signals possible further hikes

The Federal Reserve increased its benchmark interest rate by a quarter percentage point on Wednesday, moving the target range to 3.75%-4.00%. The unanimous decision by the Federal Open Market Committee was presented as a step to curb inflation that had risen again last month.

In its statement, the Fed noted that “uncertainty remains elevated owing, in part, to geopolitical developments” and said today’s action would help achieve its 2% inflation goal more promptly.

Fed Chair Kevin Warsh told reporters that “the plain fact is that inflation is too high and has been for too long” and that the committee was not convinced underlying price pressures were moving toward the target at a sufficient pace.

Economic projections released with the decision showed that all but two committee members anticipate another rate increase later in the year.

The move came despite repeated public comments from President Donald Trump urging lower rates. Wells Fargo global fixed-income co-head Brian Rehling said the Fed’s message was clear that it would not tolerate inflation drifting above target, even under political pressure.

Warsh declined to comment on any discussion with the president. He emphasized that while the Fed cannot directly control specific prices such as oil or groceries, it can act to prevent broader price distortions from spreading through the economy.

Following the announcement, major equity indexes slipped, with the S&P 500 down 0.4% and the Dow Jones Industrial Average falling 630 points. Treasury yields briefly retreated but remained near multi-year highs. Warsh attributed the recent rise in bond yields to economic strength, global hotspots—including the conflict in Iran and the war in Ukraine—and competition for capital from artificial-intelligence firms.