Fed raises interest rates for first time since 2023, defying Trump as inflation mounts

The Federal Reserve on Wednesday raised its benchmark interest rates for the first time since 2023, in a move aimed at slowing inflation that picked up again last month.

The Fed’s hike of 0.25% brings the central bank’s flagship rate to between 3.75% and 4.00%.

The Fed’s policymakers unanimously supported the rate hike and signaled one more interest rate hike could come before the end of the year.

The Fed’s decision, which defied the president’s wishes for lower interest rates, is in response to elevated inflation readings as the war with Iran drives up prices.

“Uncertainty remains elevated owing, in part, to geopolitical developments,” the Federal Reserve’s statement read. “Today’s policy action will support a timelier return to the Committee’s 2 percent goal.”

The hike could also be the start of a rate-hiking cycle. Historically, when a central bank raises rates once, it follows that up with additional increases.

Released alongside the Fed’s rate decision today were economic projections. As of this week, all but two members of the Federal Open Market Committee forecast another rate increase later this year.

The rate hike comes despite years of demands by President Donald Trump for lower interest rates. In early February, Trump told NBC News that Warsh would not have gotten the nomination unless he wanted to lower rates.

But the war with Iran changed all of that, after the U.S. and Israel launched it Feb. 28. Less than four months into the job and Warsh is now presiding over a Fed increasing rates.

The Fed’s interest rate move comes after a more than 75% surge in the price of oil this year. That has translated into gas prices that have soared more than 45% since the Iran war began.

Those prices have pushed inflation up to 3.4% as of August, above average U.S. wage growth of 3.1%.