Fed hikes rates for first time in over 3 years

The Federal Reserve raised interest rates Wednesday for the first time in several years in the face of stubborn inflation .

The central bank’s Federal Open Market Committee (FOMC), under Fed Chair Kevin Warsh, voted unanimously to increase the central bank’s benchmark interest rate to a range of 3.75 percent to 4 percent .

It marks the first time the Fed has hiked rates in more than three years , and the first time in nearly a year since the range touched 4 percent.

Warsh said after the decision that the rate hike will “support a timelier return” to the Fed’s 2 percent inflation target .

“I would be hard pressed to describe broad financial conditions as restrictive,” he told reporters. “This view was widely shared by the committee, so we removed a dose of accommodation.

Looking ahead to the final two FOMC meetings of the year, a majority of committee officials project at least one rate hik e.

Twelve of 18 FOMC officials projected a single rate hike, according to a quarterly summary of economic projections the Fed released on Wednesday.

Four officials projected two hikes, while two predicted a pair of holds. Warsh, who has strayed away from issuing forward guidance as Fed chair, did not provide a projection for the Fed’s last quarterly summary in June. He confirmed Wednesday that he again abstained from offering projections.

Markets widely expected officials to raise rates by a quarter point on Wednesday in an effort to tame inflation, which remains above the Fed’s 2 percent target amid the war with Iran.

Traders were pricing in a nearly 93 percent chance that the FOMC would raise rates by a quarter point Wednesday morning, according to the CME Group’s FedWatch tool, which tracks bets placed on future Fed decisions.

Roughly 85 percent of economists Reuters surveyed over the weekend also predicted a quarter-point hike, a shift from the 70 percent of economists who predicted a hold before the Bureau of Labor Statistics reported annual inflation in August was 3.4 percent , as measured by the consumer price index (CPI).

But the move could rankle Warsh’s relationship with President Trump . The president has long pushed for rate cuts, dating to the tenure of former Fed Chair Jerome Powell — who still sits on the FOMC and voted Wednesday to hike rates.

Welcome to The Hill’s Business & Economy newsletter , I’m Julia Shapero — bringing you the latest on the intersection of Wall Street and Pennsylvania Avenue.

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Key business and economic news with implications this week and beyond:

EU chief wants Canada as bloc’s first associate member

European Commission President Ursula von der Leyen said Wednesday she wants Canada to join the European Union as an associate member, as the North American nation is embroiled in a trade war with the U.S.

Vice President Vance weighed in on the ongoing AI safety debate Tuesday, pressing those behind the technology to be careful.

Amazon is once again raising wages for some of its workers and giving all of its U.S. employees a grocery discount.

Four Minneapolis City Council members want every driverless car operating in the city to have a human sitting behind the wheel, in an effort to protect rideshare workers.

Business and economic news we’ve flagged from other outlets:

Americans have spent $100 billion more on fuel during the Iran war ( Wall Street Journal )

OpenAI considers new financing at $1.5 trillion valuation ( New York Times )

The Pentagon is reportedly requiring troops to meet waist-to-height requirements and exhibit “impeccable” grooming standards in order to attend Defense Secretary Pete Hegseth’s “State of the Force” address later this month. Read more

The top Democrat on the House Foreign Affairs Committee took the rare step Wednesday of publicly announcing a hold on the Trump administration’s $2.8 billion plan to sell 40,000 one-ton bombs to Israel. Read more