The Federal Reserve raised interest rates Wednesday for the first time in more than three years as policymakers moved to confront inflation that remains well above the central bank’s target.
The Federal Open Market Committee voted unanimously to increase its benchmark federal funds rate by a quarter percentage point, bringing the target range to 3.75% to 4%.
The Fed said economic activity continues to expand at a solid pace, while domestic spending has remained resilient and the unemployment rate has changed little. However, policymakers said inflation remains elevated.
“Inflation remains elevated,” the committee said in a statement. “Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.”
The increase represents a significant shift for borrowers after a period in which the Fed had moved away from the aggressive rate increases used earlier in the decade to combat inflation.
Higher federal interest rates can eventually push borrowing costs higher for consumers and businesses, including rates associated with credit cards, mortgages and some business loans.
The decision followed new government data showing consumer prices increased 3.4% over the 12 months ending in August, well above the Federal Reserve’s long-term inflation target of 2%.
Fed officials also signaled that additional increases could be ahead as policymakers assess inflation, economic growth and conditions in the labor market.
The Fed said it remains committed to restoring price stability while fulfilling its mandate to promote maximum employment.
