The US Federal Reserve unanimously approved an increase in its benchmark interest rate to a range of 3.75-4%, taking such a step for the first time in three years. The decision was made despite continued pressure from President Donald Trump, who had called for the opposite.
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Kevin Warsh, head of the US central bank, said that US inflation has remained above the 2% target for more than five years.
“The decision had to be made for the simple reason that inflation remains far too high, and this situation has persisted for a long time,” Federal Reserve Chairman Kevin Warsh said.
For consumers, higher interest rates mean increased costs for loans, mortgages and credit cards, but they could also bring greater returns on savings. Major US banks, including JPMorgan, KeyCorp and BNY, also raised their prime lending rate from 6.75% to 7%.
According to Warsh, the Federal Reserve cannot intervene directly in oil or food prices, but it can prevent price increases from spreading to other sectors of the economy.
Following the announcement of the decision, Trump expressed his support for Warsh while criticizing the Federal Reserve board, which he described as “hostile” and “political.”
Although higher rates may increase mortgage costs and other financial obligations, they are also intended to slow inflation by curbing spending and encouraging saving.
