Fed Lifts Policy Rate 25 Bps to 3.75%–4.00% as Inflation Stays Elevated

The Federal Reserve raised its benchmark interest rate by 25 basis points, taking the target range to 3.75%–4.00%. Markets are now focused on the press conference by Fed Chair Kevin Warsh. The Federal Open Market Committee approved the move unanimously in a 12-0 vote. The updated dot plot continues to point to one additional rate increase before year-end. Key takeaways expected from Warsh's remarks: - The FOMC decided to raise rates by 25 basis points. - Inflation remains elevated. - The decision comes as the economy appears to be strengthening; several indicators have improved in recent months. - Economic activity is expanding at a steady pace. - The committee remains committed to achieving price stability, with inflation as the primary focus. - It is difficult to characterize overall financial conditions as "restrictive". - The employment side of the Fed's mandate is in good shape: unemployment is low, and both payrolls and hours worked are rising. - The economy is resilient. - Summer data did not show improvement on inflation; inflation is very high and has persisted for too long. - Credit flows remain strong. - Labor market conditions continue to signal underlying economic strength. - At the July meeting, the committee agreed inflation was still very high and signaled readiness to act. - The FOMC is not confident inflation is moving toward its target. - Warsh said he would not prejudge future policy decisions. - The economy's underlying strength allows the Fed to stay focused on price stability. - Inflation trends have fallen short of expectations, with few factors seen as likely to alter that trajectory. - Policymaking will not hinge on any single data point; trends matter more, as individual readings can be noisy. - In broad terms, the economy is essentially at full employment. - The economy's growth potential is higher; inflation is the core problem. The Fed's statement also reflected a shift in tone. While it said the rate increase would help bring inflation back to the 2% target in a "more timely" manner, it removed language that previously highlighted temporary supply shocks. This is not investment advice. Continue Reading: HOT MOMENTS: Fed Chairman Kevin Warsh Speaks After Interest Rate Decision – LIVE