US Federal Reserve raises rate by 0.25 percentage points
The US Federal Reserve on September 16 raised the target range for its benchmark interest rate by 25 basis points, to 3.75–4%. This is the first rate increase in three years, The National reports.
The decision was made after approximately nine months during which the rate remained unchanged. The Fed said in a statement that uncertainty remains high, particularly because of geopolitical events, while domestic spending in the United States has been resilient.
At the beginning of the year, investors expected rate cuts. According to CME Group, traders predict that the Fed will leave the rate unchanged at its next meeting and may raise it again in December.
Inflation and oil prices
In August, annual inflation in the United States stood at 3.4%. Gasoline prices rose by 3.9% over the month, while the broader energy index increased by 2.1%. Core inflation, which excludes food and energy, stood at 2.4% year-on-year.
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The Fed's decision was made amid rising oil prices due to supply disruptions in the Middle East. Brent rose to $109 per barrel after an attack on a Saudi oil pipeline, before declining to around $107. US West Texas Intermediate crude traded at $104 per barrel.
Bond market
The yield on benchmark 10-year US government bonds exceeded 5%, reaching its highest level since 2007. The US Treasury had previously announced plans to triple the volume of government debt buybacks, from $2 billion to $6 billion, to lower bond yields.
In June, nine of the 19 members of the Federal Open Market Committee believed that at least one rate increase would be needed this year. Another nine members allowed for keeping the rate unchanged or cutting it by 0.25 percentage points.
