The US Federal Reserve raised its benchmark interest rate by 0.25 percentage points. The regulator took this step amid persistent high inflation and rising government bond yields. This was reported by Qazaqyia.kz citing Kursiv Media.

According to Reuters, the decision marked the first rate hike since 2023.

Outcome of the September 16 meeting

Following its September 16 meeting, the Fed set the target range for the federal funds rate at 3.75–4% per annum. All 12 members of the committee supported the decision.

The Fed's statement said the US economy continues to grow at a solid pace. Consumer spending remains stable, while labor productivity and investment are rising. At the same time, inflation remains elevated.

"Inflation remains elevated. Today's monetary policy decision will support a more timely return to the committee's 2% target," the regulator's statement said.

Fed officials' projections

According to projections by Fed officials, 12 of 18 policymakers expect another 0.25 percentage point rate hike by the end of 2026. Four allow for two hikes, while two do not expect further policy tightening.

Thus, the regulator signaled a possible further increase in borrowing costs in the coming months.

The rate hike was the first during Kevin Warsh's leadership of the Fed, whom US President Donald Trump appointed as head of the American central bank earlier this year.

The US president has repeatedly called on the Fed to cut rates. On September 13, Trump said the United States should have the lowest interest rates in the world.

Market reaction

Before the decision was announced, the S&P 500 index rose 0.3%, while the Nasdaq added 0.7%. The market was supported by chipmaker stocks, which recovered after a recent decline.

The yield on 10-year US Treasury bonds fell to 4.95%. On Monday, it exceeded 5% for the first time since 2023.

Investors are also watching oil prices. The day before, Brent fell more than 3%, to about $105 per barrel, after reports of additional oil supplies from Saudi Arabia.

Earlier, Kursiv wrote that shares of Nvidia and other AI companies fell sharply amid concerns over artificial intelligence.