US interest rates raised for first time in three years to slow rising prices

US interest rates have been raised for the first time in more than three years and could be increased further in a bid to slow rising prices, BBC reports.

Rates were hiked to 3.75%-4% from 3.5%-3.75% by the Federal Reserve in a unanimous decision, despite fierce opposition from President Donald Trump, who had called for rates to be cut.

Fed Chair Kevin Warsh said the move was because “inflation is too high and has been for too long”, adding that it was a “sober” and “responsible decision”.

After the announcement, Trump expressed support for Warsh but said the Fed board, which votes on rate decisions, was “hostile”.

Higher interest rates make borrowing more expensive for people wanting to secure loans, mortgages, and credit cards, but can lead to better returns on savings.

Warsh said that, while there was “an attitude of optimism” within the Fed leadership, inflation remained a problem.

Like many central banks, the Fed has a target of keeping inflation at 2% or below. Warsh noted that US inflation has been above the target “for more than five years”.

That has helped make affordability one of the top concerns of American voters, who have seen fuel prices surge in response to soaring wholesale oil prices since the start of the US-Israel war with Iran. This has driven up the cost of many goods and services, as well.

While the Fed “cannot affect any individual price – whether it be oil prices, whether it be food stuffs at the grocery store”, Warsh said, the central bank can work to keep price rises from broadening across the economy.

He added that those least well off had the most to gain from lower inflation.