The Federal Reserve raised the federal funds rate by 0.25 percentage points on Wednesday, setting a target range of 3.75% to 4% and marking its first increase since 2023. The range is the highest since December 2025. The move reverses the central bank's earlier stance, when cooling inflation had led many economists to expect interest-rate cuts throughout 2026. Inflation has since intensified as the Iran war disrupts crude oil production and supplies, lifting fuel prices and raising costs across the broader economy. The Consumer Price Index increased at an annual rate of 3.4% in August, above the Fed's 2% target. The Fed said the decision would support a timelier return to that goal. Higher borrowing costs can restrain consumer spending and business investment, slowing demand and easing price pressures. Fed Chairman Kevin Warsh is scheduled to discuss the policy statement at a news conference at 2:30 p.m. ET. President Trump has repeatedly urged the Fed to lower borrowing costs. AAA said diesel averaged a record $6.31 per gallon on Wednesday, up 71% from a year earlier, while gasoline averaged $4.37, compared with $4.06 a month ago and $2.98 before the Iran war began in February. The breaking news report will be updated.