The Federal Reserve raised bank interest rates to 3.75%-4% on Wednesday, its first increase in more than three years. Borrowing costs now move higher for loans, mortgages, and credit cards, while savers may see better returns if banks pass the change through.
Michael Race reported from Washington DC as the move lifted the US range from 3.5%-3.75% to 3.75%-4%. The decision was unanimous, and it resets the cost of short-term money after a long stretch at the previous level before Wednesday.
Donald Trump hits out at Wednesday
Donald Trump called for rates to be cut and later said they should be lowered “and fast!” He also said rates “should be 1%, or less, because we are the Best Credit in the World - BY FAR”. That response puts the White House on one side of the argument and the central bank on the other, with borrowers caught in the middle.
Kevin Warsh backs higher rates
Kevin Warsh said, “The plain fact is inflation is too high, and has been for too long”. He called the move a “sober” and “responsible decision”. The logic is direct: central banks tend to raise rates when inflation is too hot, because pricier credit can slow spending and cool price increases.
Oil prices since the US-Israel war with Iran
Global oil prices have surged since the start of the US-Israel war with Iran, pushing up car fuel and the cost of goods and services generally. That backdrop helps explain why this rate move landed now, even as the US economy was described as being in a strong position. For households carrying debt, the immediate pressure is on monthly payments, not just on the next loan offer.
Whether the Federal Reserve raises rates again after this Wednesday hike is not specified, so the next move for borrowers is to watch how quickly lenders adjust loan, mortgage, and card pricing to the new range.
