Federal Reserve raises interest rates for first time since 2023

In short: The US Federal Reserve raised its main interest rate for the first time since 2023, despite calls from Donald Trump to cut borrowing costs.

What happened

The Federal Reserve, the US central bank, has increased interest rates again. This is the first rate rise since 2023.

The move was led by Fed chair Kevin Warsh, according to the Financial Times. It comes after public pressure from Donald Trump to lower rates, which would typically make borrowing cheaper.

Interest rates are the price of borrowing money. Think of it like the “rent” you pay to use someone else’s cash, and the Fed helps set the general level of that rent across the economy.

Why it matters

A Fed rate rise can affect everyday costs. It can push up interest on mortgages, car loans, business loans, and credit cards, although the timing and size of changes vary by lender. Higher rates can also slow spending and hiring, because loans get more expensive, and that can ease inflation (when prices rise over time). For savers, higher rates can sometimes mean better returns on savings accounts and some other low risk products.

Source: Financial Times