What happened
The Federal Reserve has increased interest rates by a quarter of a percentage point, the first rate hike since 2023. This decision was made despite President Donald Trump's calls for lower interest rates to boost the US economy. The rate hike is the first major move under new Fed Chairman Kevin Warsh, who was nominated by Trump to replace Jerome Powell.
The Fed's decision was unanimous, with Warsh voting in favor of the increase. The move is aimed at addressing persistent inflation fears, with the Fed stating that economic activity is expanding at a solid pace, but inflation remains elevated. The Fed hopes that this policy action will support a return to its 2 percent inflation goal.
The decision comes after a strong jobs report, which showed impressive gains in August and upward revisions to previous months' reports. Trump had responded to the jobs report by calling for lower interest rates, stating that a strong country means a lower interest rate. However, the Fed has chosen to prioritize addressing inflation concerns over stimulating further economic growth.
The rate hike has been met with a generally positive response from Wall Street, with the NASDAQ and S&P opening with gains and the Dow Jones initially opening slightly down before turning positive after the announcement.
