Fed Raises Rates to 4%, First Since 2023

The Federal Reserve raised its benchmark interest rate by 25 basis points to a range of 3.75% to 4.00%, the first increase since July 2023, in a unanimous vote. Fed Chair Kevin Warsh told a press conference: "Our predominant focus is on the price stability side of our mandate. The plain fact is that inflation is too high, and has been for too long." Policymakers expect one more hike this year and do not expect inflation back at the 2% target until after 2028. They project headline inflation at 3.7%, core at 3.4%, GDP growth at 2.3% and unemployment at 4.1%. The decision conflicts with President Donald Trump's calls for lower rates. Treasury Secretary Scott Bessent has contended inflation stems from a temporary supply shock tied to higher oil prices and tariffs, and that the Fed should see past these factors. Matt Schulz of LendingTree said a single quarter-point rise is not going to have a huge impact, but stacking a few over time adds up to something bigger. Treasury yields topped 5% on Monday amid unease over energy prices and government debt. Existing home sales dropped for a third straight month. Higher rates raise borrowing costs for mortgages, autos and credit cards and modestly benefit savers.