The Federal Reserve raised interest rates by a quarter percentage point to 3.75%-4.00%, its first increase since 2023, as inflation remained above its 2% annual target. The unanimous decision strengthened investor confidence in the central bank’s independence despite repeated public calls by President Donald Trump for rate cuts, but its hawkish tone increased uncertainty over the path ahead. Officials projected one more rate increase this year and no change in 2027, while Fed funds futures showed roughly even odds of an October hike. Stocks fell, Treasury yields rose and the dollar gained after the meeting. Investors are considering reducing duration and small-cap exposure if the move marks the start of a broader hiking cycle.