Federal Reserve raises interest rates for first time since 2023

The Federal Reserve raised interest rates Wednesday for the first time in more than three years as policymakers work to bring persistent inflation under control.

(CNN)- The Federal Reserve raised interest rates Wednesday for the first time in more than three years as policymakers work to bring persistent inflation under control.

The Federal Open Market Committee voted unanimously to increase its benchmark rate by a quarter percentage point to a target range of 3.75% to 4%. Federal Reserve Chairman Kevin Warsh, who was nominated by President Donald Trump earlier this year, joined the 12-0 vote.

The decision came despite Trump’s repeated calls for significantly lower interest rates.

“Interest rates are artificially high. Interest rates in the United States should be 1% or less,” Trump said while speaking in North Carolina Wednesday.

Trump later said he told Warsh he might as well support the increase because the rest of the board was expected to back it.

Wall Street finished lower following the Fed’s announcement. The Dow Jones Industrial Average dropped more than 630 points, while the S&P 500 and Nasdaq Composite also closed lower.

The Fed’s decision comes as inflation remains above its 2% target and higher energy prices tied to the ongoing conflict with Iran add pressure to consumer prices. Warsh said Wednesday that inflation remains elevated and that recent trends have not shown sufficient improvement.

Record diesel prices are also putting pressure on industries that rely heavily on fuel, including farming and trucking. Higher transportation and production costs can eventually contribute to higher prices for food and other consumer goods.

The rate increase is intended to help curb inflation by making borrowing more expensive and reducing demand. However, higher rates can also increase borrowing costs for consumers, including rates on credit cards, auto loans and some other forms of credit. Mortgage rates are influenced by a broader set of market factors but can also be affected by expectations for Federal Reserve policy.

New projections released Wednesday showed most Fed policymakers anticipate at least one additional rate increase before the end of the year, though Warsh said the central bank would not prejudge future decisions.