Fed raises interest rates as inflation persists and growth strengthens

  • Federal Reserve officials unanimously raised the key interest rate Wednesday.
  • Gas reached $4.44 per gallon, while diesel climbed to a record $6.40.
  • The Iran war entered its seventh month as officials reassessed inflation risks.

The Federal Reserve unanimously raised its key interest rate Wednesday after about six weeks of holding it steady, with nearly all policymakers indicating that another increase later this year would likely be appropriate. Officials pointed to renewed fighting in the Middle East, rising gas prices and evidence that the economy continues to grow at a healthy pace despite stubborn inflation. The Fed’s latest statement dropped its previous reference to supply shocks and instead said consumer and business spending has been resilient. Gas prices reached $4.44 a gallon Thursday, 38 cents above a month earlier, while diesel hit a record $6.40. Although higher short-term rates are intended to slow borrowing and spending, financial markets appeared reassured by the Fed’s commitment to controlling inflation: The 10-year Treasury yield slipped Thursday. Longer-term borrowing costs remain elevated, however, with the 10-year Treasury yield topping 5% and the average 30-year fixed mortgage rate nearing 7%. President Donald Trump criticized the Fed and called for lower rates, but did not attack Chairman Kevin Warsh, unlike his repeated attacks on predecessor Jerome Powell. Economists cited inflation, heavy corporate borrowing for artificial-intelligence data centers, stronger growth and rising government debt as factors affecting longer-term rates.

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