Fed raises interest rates for first time in more than three years, Trump says board of governors is hostile

U.S. interest rates were raised for the first time in more than three years and may be raised further in order to curb rising prices.

The Federal Reserve voted unanimously to raise interest rates to a range of 3.75% to 4% from 3.5% to 3.75%. Previously, President Donald Trump (Donald Trump; Trump) has been calling for interest rate cuts and has expressed strong opposition to interest rate increases.

Fed Chairman Kevin Warsh said the move was because "inflation has been too high and has lasted too long," calling it a "sober" and "responsible decision."

After announcing the rate hike, Trump expressed support for Warsh but called the Fed's board of governors, which votes on rate decisions, "hostile."

Warsh said at a press conference after the announcement of the interest rate decision on Wednesday (September 16) that despite the "optimism" within the Fed's leadership, inflation remains a problem.

Like many central banks, the Fed has set a goal of keeping inflation at or below 2%. Warsh noted that U.S. inflation has been above target for "more than five years."

This has made the cost of living one of the top concerns for American voters - since the United States and Israel went to war against Iran, wholesale oil prices have soared, driving up fuel prices and pushing up the cost of many goods and services.

Warsh said that while the Fed "can't influence any single price — whether it's the price of oil or the price of food at the grocery store," the central bank can work to prevent rising prices from spreading throughout the economy.

He also said that the strength of the job market and the overall economy means that the Fed will continue to focus on stabilizing prices, and that the lowest-income groups will benefit the most from low inflation.

Central banks usually raise interest rates when inflation is high to curb consumption and encourage savings in the hope of slowing price increases. But it's a balancing act, as higher rates could also prompt companies to delay investment, hurting economic growth.

What higher interest rates mean for Americans

When Warsh was appointed, Democratic lawmakers said he would become Trump's "puppet" and many Fed watchers expected him to implement Trump's continued calls for steep interest rate cuts. Trump had previously harshly criticized Warsh's predecessor, Jerome Powell, for his reluctance to cut interest rates.

Asked Wednesday what message the rate hike sent to Trump, Warsh smiled and then said: "I have nothing to tell you about discussions with the president."

Trump later told reporters: "I rely on Kevin (Wash) very much, but he faces, you know, a very difficult board to deal with."

He also said: "The interest rates are too high and not appropriate... I talked to Kevin and I said, 'You might as well vote with the board, it doesn't matter anyway.' The board is hostile, they are very politicized."

Earlier, Trump wrote on social media: "Lower interest rates for the United States of America, and fast!"

Democrats on Capitol Hill say raising interest rates will make loans more expensive, pushing more Americans into debt.

"It's going to make everything more expensive," Senate Democratic leader Chuck Schumer said. "That's because Donald Trump doesn't know how to manage the economy."

This interest rate hike is the first time the Federal Reserve has adjusted interest rates since it cut interest rates in December 2025. The last rate hike was in July 2023.

The hike could push up mortgage rates for homebuyers and cause Americans to spend more on other types of debt.

Major U.S. banks including JP Morgan, KeyCorp and BNY all raised their prime lending rates to 7% from 6.75% on Wednesday, which will affect interest rates on credit cards and personal loans.

Mortgage costs have climbed over the past year but remain below their peak in 2023. According to Freddie Mac, the average interest rate for a 30-year fixed-rate mortgage is 6.76%, and the 15-year rate is 6.09%.

Many U.S. homeowners hold 30-year or 15-year fixed-rate mortgages, and changes in interest rates will not affect their monthly payments. But higher interest rates could impact people looking to apply for a new mortgage or refinance.

Warsh declined to comment on his personal view on where the Fed's interest rates will go, but most of his colleagues said they expect rates to rise again to between 4% and 4.25% by the end of the year.

A slight majority of officials also said interest rates could rise further to a range of 4.25% to 4.5% next year before rate cuts would begin in 2028 and 2029.

Relevant forecasts show that price increases will slow down in the next few years. As a measure of the cost of living, the inflation rate is expected to gradually fall back to the Federal Reserve's target level by 2029.

Since the Iran war, the Federal Reserve is not the only one facing rising inflation - the European Central Bank (European Central Bank) has raised interest rates last week, and the Bank of England (Bank of England) will also make its own interest rate decision on Thursday (17th).

This article was originally written in English. We used artificial intelligence to assist with translation and was reviewed by BBC journalists before publication. Learn more about how we use artificial intelligence.

Interest rates in China and the United States are in a world of ice and fire.

BBC Chinese reporter Chen Yan

The "interest" in the interest rate hike refers to the U.S. federal funds rate. Simply put, this is the interest rate used by U.S. banks to lend money to each other.

Raising interest rates means raising the interest rate. As banks' borrowing costs rise, interest rates for lending to businesses and individuals will also rise. People's willingness to borrow money will naturally decrease, demand for loans will decrease, and the supply of money circulating in the market will tighten. Inflationary pressure will be alleviated, and the economy will slowly cool down.

In turn, if interest rates are cut, the interest rates for bank lending will be lower, the cost of borrowing money will be cheaper, companies and individuals will be more willing to lend, more funds will flow into the real economy, and overall economic activities will become more active.

The Fed adjusts this interest rate in order to achieve one goal: to maximize employment in the United States while maintaining price stability. When the economy is weak, interest rates are lowered to inject more liquidity into the market to stimulate economic recovery; when the economy is overheated, interest rates are raised to tighten the money supply, curb inflation, and avoid risks caused by excessive economic expansion.