WASHINGTON — The U.S. Federal Reserve raised interest rates on the 16th for the first time in three years and two months, unable to hold off pressure from rising oil prices and inflation. The central bank signaled it could raise rates once more before the end of the year. With the Bank of Japan seen likely to lift rates on the 18th, following the Bank of Korea's increase last month, the global tightening cycle is accelerating.
The Fed said the decision to raise the benchmark rate by 0.25 percentage point was unanimous among the 12 voting members, following a two-day meeting of the Federal Open Market Committee at its headquarters in Washington. It was the first increase since July 2023. The U.S. benchmark rate rose to a range of 3.75% to 4.00%, putting the upper end 1.00 percentage point above Korea's 3.00%.
In the dot plot released with its Summary of Economic Projections — a quarterly chart showing individual policymakers' rate forecasts as dots — the Fed put the median year-end rate at 4.125%, signaling room for another increase at the October or December meeting.
"Inflation is too high and has persisted for too long," Fed Chair Kevin Warsh said at a news conference after the meeting. "This policy action will contribute to returning inflation to our 2% goal in a timely manner." In remarks aimed at the Donald Trump administration, he added that those responsible for trade and fiscal policy should also stay within their own lanes.
The hawkish tone was stronger than expected. The yield on the 10-year U.S. Treasury note, the bond market's benchmark, spiked to 5.027% immediately after the FOMC meeting before falling back into the 4% range and swinging repeatedly. Yields on the policy-sensitive two-year note and the long-dated 30-year bond also fluctuated. In New York, the blue-chip Dow Jones Industrial Average fell 1.21% to its lowest level in three months, since June 12.
As the U.S. shifted into tightening, the won closed the domestic session at 1,382.2 per dollar as of 3:30 p.m., up 13.6 won from the previous day. It was the first session-close above 1,380 won in three weeks, since the 27th of last month, when it settled at 1,380.9.
