The Federal Reserve raised its benchmark interest rate by a quarter-percentage point (25 basis points) to a target range of 3.75% to 4% today.
The decision of the FOMC was unanimous and at least we know now that Fed Chair Kevin Warsh is not going to do Trump’s bidding. (Trump blasted the decision afterwards and opined on Truth Social that rates should be at 1%.)
The federal funds rate had never been at zero before the Great Recession.
After the Covid-19 pandemic and recession, it went to zero again.
We can now say (with the benefit of hindsight) that the Federal Reserve should have started to raise rates in mid-to-late 2021, when consumer demand was surging and vaccines were widely distributed. Keeping the rate at zero for too long (until Mar. 2022) helped to cause massive inflation and then the rate had to be ratcheted up rapidly to above 5%.
