Washington: The US Federal Reserve raised its benchmark interest rate by 25 basis points Wednesday, marking its first rate hike in more than three years as inflation remained elevated. The Federal Open Market Committee (FOMC) increased the target range for the federal funds rate to 3.75%-4% to support the central bank's dual mandate of maximum employment and price stability. The decision received unanimous approval with a 12-0 vote.

According to Anadolu Agency, the Fed emphasized that "inflation remains elevated," and noted that this policy action would aid in a "timelier return" to its 2% inflation target. The Fed reiterated its commitment to delivering price stability, highlighting the importance of this move.

Recent data from the Bureau of Labor Statistics revealed that US consumer inflation remained significantly above the central bank's target in August. The Consumer Price Index (CPI) rose 0.4% month-on-month in August, an increase from the 0.1% rise in July. Annual inflation held steady at 3.4%, unchanged from the previous month. Core inflation, which excludes volatile food and energy prices, eased slightly to 2.4% annually, despite a monthly acceleration to 0.3%.

Energy prices surged 16.3% over the past year, with gasoline prices witnessing a 27.4% increase. The Fed reported that economic activity continued to grow at a solid pace, with domestic spending remaining resilient despite elevated uncertainty partly due to geopolitical developments. Productivity growth was strong, and capital investment remained robust.

The central bank also highlighted that job gains had kept pace with workforce growth, with the unemployment rate experiencing little change. The FOMC affirmed its commitment to maintaining ample reserves in the banking system, underscoring the importance of this strategy in achieving its objectives.