Federal Reserve raises interest rates

The Federal Reserve unanimously lifted its benchmark interest rate by a quarter percentage point, its first increase since 2023. Officials cited inflation risks linked to higher energy prices and an economy they judged able to absorb tighter policy. Most policymakers signaled that another increase later this year could be appropriate.

• 25 basis pointsIncrease in benchmark rate
• Since 2023First increase in years

Q1

How does a rate hike work?

By raising the short-term rate it controls, the Fed aims to reduce borrowing and spending, easing pressure on prices over time.

Q2

Why did officials act now?

Renewed Middle East fighting lifted oil and gas prices, while inflation stayed high and growth remained healthy enough for tighter policy.

Q3

Which loans may cost more?

Credit-card balances and car loans are likely to become more expensive, while higher rates can benefit savers with interest-bearing accounts.

Q4

Must mortgage rates rise immediately?

No. Mortgage costs depend partly on longer-term market rates; the Treasury yield slipped after the decision as investors assessed inflation risks.

• Indiatimes
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