The US Federal Reserve has raised its key interest rate for the first time in three years. What is the reason?

The US Federal Reserve has raised its key interest rate for the first time in three years. What caused this?

At its September meeting, the US Federal Reserve raised its key interest rate by 0.25 percentage points, setting it in the range of 3.75-4 percent. This was announced in a press release published by the Federal Open Market Committee (FOMC).

The last rate hike occurred in July 2023.

The decision to raise the rate was unanimously approved by 12 members of the FOMC.

Annual inflation in the US is not decreasing. In August, this figure stood at 3.4 percent. Although the Fed's long-term goal is to bring inflation down to 2 percent, the decline in prices is happening much slower than expected. For example, in August, price growth accelerated to 0.4 percent from 0.1 percent in July.

Due to tensions in the Middle East, a barrel of oil on the international market has once again exceeded $100. At the same time, diesel fuel prices have also risen significantly, which is increasing costs across all sectors. For example, annual inflation for energy goods stands at 16.3 percent.

Fed Chairman Kevin Warsh noted that the economy is growing at a solid pace, household spending and investments remain high, and the labor market is also moderate. If such strong demand persists in the economy, inflation can only be curbed by tightening monetary policy.

At a press conference, the Fed Chairman mentioned that the regulator cannot directly influence the prices of individual products such as oil or food.

He explained that the rate hike should help prevent price increases from spreading more widely across the economy.