{"id":1238,"date":"2026-09-18T03:01:44","date_gmt":"2026-09-17T19:01:44","guid":{"rendered":"https:\/\/btbitcoin.net\/index.php\/2026\/09\/18\/why-the-federal-reserve-is-lifting-rates-now-and-what-it-means\/"},"modified":"2026-09-18T03:01:44","modified_gmt":"2026-09-17T19:01:44","slug":"why-the-federal-reserve-is-lifting-rates-now-and-what-it-means","status":"publish","type":"post","link":"https:\/\/btbitcoin.net\/index.php\/2026\/09\/18\/why-the-federal-reserve-is-lifting-rates-now-and-what-it-means\/","title":{"rendered":"Why the Federal Reserve is lifting rates now, and what it means"},"content":{"rendered":"
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WASHINGTON (AP) \u2014 About six weeks ago, Federal Reserve Chairman Kevin Warsh announced that a divided central bank was keeping its key interest rate unchanged. <\/p>\n

But on Wednesday, the Fed’s rate-setting committee unanimously agreed to a rate hike, and nearly all policymakers signaled that a second increase later this year would likely be appropriate. <\/p>\n

So what changed? <\/p>\n

In short, the renewed fighting in the Middle East has pushed up gas prices again. And there are signs the economy is still growing at a healthy pace even as inflation stays stubbornly high. All three factors appear to have pushed the committee from wait-and-see mode to determined action. <\/p>\n

Yet the Fed’s move doesn’t necessarily mean Americans will pay significantly higher costs for mortgages or other borrowing in the short-term, because financial markets appear reassured by the Fed’s commitment to fighting inflation. On Thursday, the 10-year Treasury yield even slipped a bit, a likely sign of reduced inflation worries among investors. <\/p>\n

The Fed’s increase “alleviates concerns around the Fed taking sticky inflation seriously,” Oscar Munoz, head of U.S. economic research at TD Securities, said. “And that they’re ready to act, not just talk about it but actually act.” <\/p>\n

The Fed increases the short-term rate it controls to slow borrowing and spending and ideally cool inflation. The Fed’s rate can influence longer-term costs such as mortgage rates, but the Fed doesn’t directly control them. <\/p>\n

Warsh throws in towel on ‘temporary’ shocks <\/p>\n

For months, Fed officials have considered whether higher oil and gas prices from the Iran war would just amount to a temporary hit to inflation. If so, it might not make sense to hike rates: By the time higher borrowing costs started to slow the economy, the gas price shock could be over and inflation would fall back to the Fed’s 2% target on its own. <\/p>\n

But with the Iran war now in its seventh month, Fed officials are no longer counting on it being a temporary shock. <\/p>\n

At the Fed’s previous meeting July 29, its statement said inflation was elevated “in part reflecting supply shocks that have driven price increases in certain sectors, including energy.” <\/p>\n

But its latest statement Wednesday dropped that reference to supply shocks, and instead noted that consumer and business spending “has been resilient.” <\/p>\n

And at his news conference Wednesday afternoon, Warsh said, “our judgment about … the geopolitical situation has changed.” <\/p>\n

Gas prices, meanwhile, have continued their steady march higher, reaching $4.44 a gallon Thursday, according to AAA. That’s 38 cents higher than a month ago. Diesel prices have hit record highs at $6.40, which will push up shipping costs for many types of goods. <\/p>\n<\/p><\/div>\n