US interest rates rise as Fed signals another hike could be coming this year

The Federal Reserve has raised interest rates for the first time in more than three years as policymakers respond to elevated US inflation and rising oil prices.

The Federal Open Market Committee voted unanimously on Wednesday to increase its benchmark rate by 25 basis points, bringing the target range to 3.75 percent to 4 percent.

“Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability,” the committee said in its post-meeting statement.

The increase, the Fed’s first since July 2023, had been widely expected by financial markets.

Updated projections showed most officials believe another increase could be needed before the end of 2026.

Sixteen of 18 participants projected another hike, while four saw the possibility of two additional increases.

The Fed also raised its inflation forecasts with officials now expecting headline personal consumption expenditures inflation to reach 3.7 percent this year, with core inflation at 3.4 percent.

The central bank does not expect inflation to return to its two percent target until 2029.

The Fed also lowered its projected unemployment rate to 4.1 percent.