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Federal Reserve expected to announce first interest rate increase in three years
Good afternoon. The US Federal Reserve is widely expected to raise interest rates for the first time since 2023 amid persistently high inflation.
It is anticipated to raise interest rates by a quarter of a percentage point (25 basis points), bringing the benchmark federal funds rate to a new target range of 3.75% to 4%.
The central bank’s last increase effectively bookended its Covid pandemic response, but inflation has remained above the Fed’s 2% target for more than five years now and has been further exacerbated by Donald Trump’s disastrous and ongoing war against Iran.
The US president has repeatedly demanded that rates be cut, creating intense pressure on his handpicked chair, Kevin Warsh. On Sunday, days before the Fed’s September meeting was due to kick off, Trump said the United States should have “the lowest interest rate in the world” regardless of what the data indicates about inflation or the economy.
If he decides to go ahead with the hike, Warsh will no doubt infuriate the president, who regularly attacked his predecessor Jerome Powell. Trump has so far been more supportive of Warsh since he took charge earlier this year, but he’s become more vocal recently.
“LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT,” the president posted on social media two weeks ago.
The decision comes just weeks out from November’s crucial US midterm elections, which will determine whether or not Trump’s Republican party retains control of Congress, where affordability and the cost-of-living crisis is the major issue for voters.
The Fed is due to release its decision at 2pm ET, and Warsh will hold a press conference at 2.30. We’ll bring you all the latest here, so stay tuned.
