{"id":25582,"date":"2026-09-17T08:21:02","date_gmt":"2026-09-17T02:36:02","guid":{"rendered":"https:\/\/eng.dragonmedia.com.np\/?p=25582"},"modified":"2026-09-17T08:21:02","modified_gmt":"2026-09-17T02:36:02","slug":"fed-raises-interest-rate-by-25-basis-points-as-inflation-remains-elevated","status":"publish","type":"post","link":"https:\/\/eng.dragonmedia.com.np\/?p=25582","title":{"rendered":"Fed Raises Interest Rate by 25 Basis Points as Inflation Remains Elevated<\/strong>"},"content":{"rendered":"

Dragon Media News Desk<\/strong><\/p>\n

The U.S. Federal Reserve has raised its target federal funds rate by 25 basis points to a range of 3.75 percent to 4 percent in an effort to bring persistent inflation under control. The move marks the Fed\u2019s first interest rate increase since July 2023. The Federal Open Market Committee unanimously approved the rate hike at its September 15\u201316 meeting.<\/p>\n

The committee said U.S. economic activity continues to expand at a solid pace, while domestic spending remains resilient, productivity growth is strong and capital investment is robust. Job gains have kept pace with growth in the labor force, and the unemployment rate has changed little. However, economic uncertainty remains elevated, partly because of geopolitical developments.<\/p>\n

The Fed said the rate increase was consistent with its dual mandate of maintaining price stability and maximum employment. Inflation remains above the central bank\u2019s preferred level, and policymakers said the latest move is intended to support a more timely return toward the 2 percent inflation target. All 12 FOMC members voted in favor of the increase.<\/p>\n

Alongside the policy decision, Federal Reserve Board members and regional Federal Reserve Bank presidents released updated economic projections covering 2026 through 2029. The median projection for U.S. gross domestic product growth in 2026 was raised to 2.3 percent from 2.2 percent in June. The unemployment rate is now projected at 4.1 percent, down from the previous forecast of 4.3 percent.<\/p>\n

For 2027, policymakers raised their economic growth projection to 2.4 percent from 2.3 percent and lowered the expected unemployment rate to 4.1 percent from 4.3 percent. Inflation, as measured by the personal consumption expenditures price index, is projected at 3.7 percent in 2026, slightly above the 3.6 percent forecast issued in June. The inflation projection for 2027 remains unchanged at 2.3 percent.<\/p>\n

Federal Reserve Chair Kevin Warsh said after the meeting that inflation remains too high and has remained elevated for too long. He warned that prolonged inflation could weaken public confidence that price pressures will eventually return to normal levels. Warsh said the unanimous vote demonstrated the central bank\u2019s determination to restore price stability more quickly.<\/p>\n

Warsh argued that the U.S. economy remains sufficiently strong and resilient to absorb a quarter-point interest rate increase. However, he stopped short of signaling that an aggressive cycle of repeated rate increases was imminent, saying he would not commit the Fed to a predetermined future path.<\/p>\n

The Fed has also established a task force to examine the possible economic impact of artificial intelligence, Warsh said. Responding to President Donald Trump\u2019s public calls for lower interest rates, he emphasized that Federal Reserve independence is a \u201ctwo-way street\u201d and that policymakers would remain within the institution\u2019s established responsibilities.<\/p>\n

Earlier in September, Trump threatened to completely halt trade with countries running trade surpluses with the United States if the Fed failed to cut interest rates. The remarks renewed debate over the independence of the U.S. central bank and the degree to which political pressure could influence monetary policy.<\/p>\n

Following the Fed\u2019s decision, major U.S. stock indexes turned lower. The yield on the 10-year Treasury bond rose by two basis points to 5.012 percent, while the 30-year Treasury yield slipped by 0.5 basis points to 5.357 percent. The U.S. dollar index gained 0.6 percent to 100.3.<\/p>\n

Market analysts interpreted the unanimous 12\u20130 vote as a relatively hawkish signal. Their assessment is that another rate increase before the end of 2026 remains possible if inflation stays elevated. Updated projections from Fed officials also indicated that the policy rate could reach a range of 4 percent to 4.25 percent by year-end.<\/p>\n

Major financial institutions, including Goldman Sachs, JPMorgan Chase and Morgan Stanley, have also adopted a more hawkish outlook following the decision, anticipating the possibility of further monetary tightening. Shawn DuBravac, chief economist at the Global Electronics Association, described the rate increase as an important shift in policy direction and said it could reinforce the Fed\u2019s credibility in the fight against inflation.<\/p>\n

Some economists, however, have questioned whether the rate increase was necessary. They argue that much of the recent increase in core prices has been driven by temporary supply disruptions and geopolitical pressures rather than by excessive domestic demand. From this perspective, further rate increases could risk slowing economic activity more than necessary.<\/p>\n

The Federal Reserve has two more policy meetings scheduled before the end of 2026. Future decisions are expected to depend on inflation, employment, economic growth and broader financial conditions. The latest move nevertheless signals a renewed shift toward tighter monetary policy as the Fed places greater emphasis on restoring price stability.<\/p>\n

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