Share to ClassroomFederal Reserve Raises Rates, First Since 2023
The US Federal Reserve, or the Fed, raised interest rates on Wednesday. It was the first rise in more than three years. The Fed is the country's central bank — the bank that controls the cost of borrowing money. Its main rate went up by a quarter of a percentage point, to between 3.75% and 4%. Fed Chair Kevin Warsh said inflation was "too high" and had been "for too long".
Inflation means that prices are going up. In the US, prices have risen faster than the Fed's 2% target for more than five years. In August, inflation was 3.4%. One big reason is the war with Iran, which started in February and made oil and gasoline more expensive. President Donald Trump wanted lower rates, and after the decision he called the Fed's board "hostile".
Higher rates make borrowing more expensive. Some big banks quickly raised their lending rate to 7%, so credit cards and loans now cost more. The average rate for a 30-year home loan, called a mortgage, had already risen to 6.95%, the highest since January 2025. Higher mortgage rates can add hundreds of dollars a month to a buyer's costs. But people who save money may earn more. Most Fed officials expect one more rise this year.
