Overview
- The Federal Open Market Committee voted unanimously to raise the target federal funds rate by 25 basis points to a 3.75%–4.00% range, the first increase since July 2023.
- Fed officials said inflation remains elevated and released projections that point to at least one more rate increase before year-end.
- Markets had priced a hike and pushed benchmark yields higher with the 10-year Treasury briefly topping 5 percent, which raises borrowing costs for consumers, businesses and the U.S. government.
- The decision puts Chair Kevin Warsh in open tension with President Donald Trump, who has pushed for lower rates, and it increases pressure on other central banks such as Banxico because of wider policy-rate gaps.
- Higher U.S. rates and yields strengthen the dollar and can tighten financing for emerging markets, a dynamic that could raise costs for households and governments and shape markets through the rest of the year.