Fed Raises Interest Rates for First Time Since 2023, Chair Warsh Cites Persistent Inflation

The US Federal Reserve raised interest rates on Tuesday for the first time since 2023, with Chair Kevin Warsh saying the central bank remains focused on price stability after policymakers concluded that inflation was not "moving to our objective."

"Inflation is too high and has been for too long," Warsh said, according to the Federal Reserve's public remarks following the rate decision.

The move marks a shift for the Federal Open Market Committee (FOMC), which had held rates steady in recent years. Warsh indicated that the committee's decision reflected ongoing concerns that price growth had not sufficiently eased toward the Fed's target.

Kay Haigh, global head and chief investment officer of Fixed Income and Liquidity Solutions at Goldman Sachs Asset Management, said in an analysis that the Fed had signaled it does not currently envision an aggressive tightening cycle. According to Haigh, most FOMC members' projections, contained in the Summary of Economic Projections (SEP), point to a total of two rate hikes for the year.

Haigh said the Fed would likely skip its October meeting given its proximity to the midterm elections. Goldman Sachs Asset Management's base case is for one additional rate increase in December, Haigh said, though that outlook remains contingent on upcoming consumer price index reports and the trajectory of energy prices.

The Fed's announcement comes as policymakers continue to weigh the balance between controlling inflation and avoiding excessive strain on economic growth. Further details on the committee's economic projections and the reasoning behind the decision were expected to be released alongside the policy statement.