Unanimous Federal Reserve Hikes Interest Rates for First Time in 3 Years

The Federal Reserve raised its benchmark interest rate on Wednesday with a one-quarter percentage point increase.

The unanimous decision brings the federal funds rate to a range between 3.75 percent and 4.0 percent.

“Our decision comes at a time when the economy appears to be strengthening,” Fed chairman Kevin Warsh said at a press conference on Wednesday.

This was the first increase in three years. The move marks a reversal of the Fed’s previous rounds of cuts in late 2024 and 2025, moves that were spurred by concerns among Fed officials that the economy was slowing and the labor market was weakening. The increase suggests Fed officials are now confident in the resilience of the economy and view stubborn inflation as a greater risk.

“Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little,” the Fed said in a statement released at the conclusion of the two-day meeting of the Federal Open Market Committee. “Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal.”

The Fed says it targets two percent inflation. In the pre-pandemic era, inflation consistently undershot that target. Since March of 2021, inflation has run above the target.

At his press conference, Warsh characterized the rate increase as removing “a dose of accommodation” in an effort to speed inflation’s return to the Fed target.