US Federal Reserve raises interest rates by 25 basis points to 3.75% in first hike since 2023

The US Federal Reserve (Fed) raised interest rates by 25 basis points, bringing them to a range of 3.75% to 4.00%, in its first increase since 2023, noting that inflation remains above the 2% target.

The Fed Chair stressed that the bank is carefully monitoring economic data, and that the rate hike decision came after a thorough review of indicators showing that inflation still poses a real pressure on the economy despite some improvement.

The announcement triggered a sell-off in bond and stock markets, while the US dollar rose against a basket of major currencies, amid expectations of continued monetary policy tightening if inflationary pressure persists.

This decision presents a test of the US economy's resilience in the face of tighter financing conditions, amid concerns that higher costs could burden consumers and the labor market in the coming period.

What do these terms mean?

Basis point: A unit of measure equal to 0.01%. Raising rates by 25 basis points means a 0.25% increase—the standard method central banks use to announce interest rate changes.