US interest rates raised for first time in three years

The Federal Reserve raised its benchmark interest rate by 0.25 percentage points to a range of 3.75%-4%, the first hike in more than three years and a unanimous decision taken despite public opposition from President Trump. Fed Chair Kevin Warsh said inflation has been above the bank’s 2% target for over five years and that higher rates are needed to prevent price rises from broadening across the economy; he pointed to a still-strong jobs market as giving the Fed scope to focus on price stability. The move follows rising fuel and wholesale oil costs tied to recent geopolitical tensions, which have pushed up consumer prices and made affordability a top voter concern.

Higher rates immediately raise borrowing costs for mortgages, loans and credit cards and prompted major banks including JP Morgan, KeyCorp and BNY to lift their prime lending rate to 7% from 6.75%. Average mortgage rates cited were about 6.76% for a 30-year fixed and 6.09% for a 15-year fixed, with many existing homeowners protected by fixed rates but new buyers and refinancers facing higher costs. Fed officials signaled further hikes likely this year to 4.0-4.25%, with a small majority penciling in 4.25-4.5% next year and cuts expected only in 2028-29; inflation is forecasted to drift toward target by 2029.