The Federal Reserve raises interest rates by a quarter of a percentage point

The U.S. Federal Reserve raised its key interest rate by 0.25 percentage points to a range between 3.75% and 4% on Wednesday. This marks the Fed’s first rate hike in more than three years, as the central bank grapples with stubborn inflation fueled by rising energy prices. Some Wall Street analysts also expect the Fed to raise rates one or two more times in the coming months. Inflation remains well above the central bank’s annual target of 2%, with the consumer price index rising 3.4% year-on-year in August. Interest rate hikes are the Fed’s most potent tool for curbing inflation, as they encourage businesses and consumers to reduce spending, thereby cooling economic activity and helping to restrain price increases amid slowing demand. With limited progress in the United States toward ending the war with Iran, some economists expect high energy prices to persist for several months, which could prompt the Fed to further tighten monetary policy in its effort to curb inflation.