Federal Reserve Raises Fed Funds Rate By 25 Basis Points to a 3.75% / 4.00% Target

In Kevin Warsh's second meeting as Chairman of the Federal Reserve, he presided over the first rate hike in three years. It is a quarter point hike.

This action is intended to promote a timelier return to the Fed's 2% inflation target.  An additional hike before December 31 is forecast by 16 of the 18 Federal reserve members.  The median participant believes that the Fed funds rate will be 4.10% at the end of 2026 and 2027.

The economy is strengthening, but inflation has continued above the Fed's 2% target and has increased over the last several months.  To boot, there is a real risk that oil prices will continue to increase due to the mismanagement of the war in Iran and that will continue to impact prices across all sectors throughout the economy.   The Fed therefore was correct to focus on the price stability side of its mandate.   While the Fed cannot directly affect energy prices, it can begin a course of action to try to temper secondary pricing repercussions.