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Listen to this article in summarized format The move marks a shift for the US central bank, which had kept rates unchanged since January as it waited to assess the impact of higher energy prices, tariffs and broader price pressures on the economy. Inflation forces Fed action The Fed's decision comes after consumer inflation stayed at 3.4% in August, unchanged from the previous month but still much higher than the central bank’s 2% target. Inflation pressures have been supported by higher energy prices following renewed tensions in the Middle East, the impact of tariff policies and strong demand linked to the artificial intelligence boom. Warsh faces first big credibility test The rate hike is also a major test for Fed Chair Kevin Warsh, who took over the central bank earlier this year. Warsh had avoided giving clear guidance on the likely path of rates, but he had signalled that the Fed would act if inflation failed to slow meaningfully. The decision could put him at odds with US President Donald Trump, who had picked Warsh with the expectation that he would support lower interest rates to boost economic activity. Trump has repeatedly pushed the Fed to cut rates, arguing that lower borrowing costs would help growth. But inflation has left the central bank with less room to ease policy. Also Read: US Fed chair Kevin Warsh explains why the Federal Reserve raised interest rates What the rate hike means Analysts say that a hike could strengthen the Fed Chair’s inflation-fighting credibility, and the Fed may need to signal a limited further hiking cycle to avoid excessive tightening of financial conditions. Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclourses here. (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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