US Fed Raises Interest Rates After 3 Years... "Will Raise It Once More This Year"

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The US Federal Reserve (Fed) has raised interest rates for the first time in about three years, but signaled that there would only be one more hike this year.

According to MarketWatch on September 16 (local time), the Fed decided to raise the benchmark interest rate by 0.25 percentage points to an annual range of 3.75-4%. This increase was unanimous. The Fed stated in its announcement, “This action will support a more timely return of inflation to our 2% target.” What the market focused on was not the rate hike itself, but the path thereafter.

The median interest rate projection from Fed members indicated one more hike this year. 16 out of 19 members expected an additional hike at the October or December meeting. If raised one more time, the benchmark interest rate would rise to an annual 4-4.25%. In contrast, no additional hikes were projected for 2027 based on the median.

Internal differences within the Fed regarding the 2027 outlook remain significant. While 10 members expected no change in interest rates next year, 8 projected an additional 0.25 percentage point hike. According to the Fed's projections, interest rates are likely to remain high until 2027, then be cut once in 2028, falling to an annual 3.75-4%.

Federal Reserve Chairman Kevin Warsh has previously stated his position not to provide guidance that pre-commits to future policy paths. MarketWatch reported that before this meeting, the market had priced in a more than 90% chance of a 0.25 percentage point hike. High energy prices, rising import prices, and a sharp increase in long-term Treasury yields were cited as factors increasing the Fed's burden in responding to inflation.

With this decision, the Fed has once again tightened its stance to curb inflation but did not signal consecutive large-scale increases. While the likelihood of one more hike in the remaining meetings this year has increased, the differences in views among committee members regarding the 2027 interest rate path remain a key variable for future monetary policy.

[Article Key Summary]

-The Fed decided to raise the benchmark interest rate by 0.25 percentage points to an annual 3.75-4%, and this decision was unanimous.

-16 out of 19 Fed members expected one additional interest rate hike in October or December this year.

-The median interest rate projection indicated a freeze in 2027 and one cut in 2028, but there were significant differences in projections among committee members.

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