The U.S. Federal Reserve raises its policy interest rate to 3.75%-4% and anticipates another increase by the end of the year

The United States Federal Reserve raised its benchmark interest rate by 0.25 percentage points on Wednesday, to a range of 3.75%-4%, and signaled that it could implement another increase by the end of the year. The decision, adopted unanimously under the leadership of the Fed’s new chair, Kevin Warsh, comes amid persistent inflationary pressures in the U.S. economy.

According to the new projections, 16 of the 18 members of the monetary policy committee anticipate at least one more 25-basis-point increase this year. The Fed estimates that the interest rate will reach between 4% and 4.25% at the end of 2026 and will remain at a similar level in 2027.

Inflation is being fueled by tariffs imposed on imports, the energy shock caused by the conflict in the Middle East, and massive investment in the artificial intelligence sector. PCE inflation is estimated at 3.7% at the end of the year, above the previous forecast of 3.6%, while a return to the 2% target is not expected before 2029.

The Fed slightly revised upward its estimate for U.S. economic growth, to 2.3%, and anticipates an unemployment rate of 4.1%. The interest rate hike will increase borrowing costs at a time when 30-year mortgage rates are approaching 7%.