Fed hikes rates, with analysts seeing more tightening ahead

The Federal Reserve on Wednesday raised its benchmark interest rate to a target range of 3.75% to 4% after holding rates steady for five straight meetings, responding to persistent inflation and a still-solid labor market. It was the first rate hike since 2023. The move, widely anticipated by markets, tested Fed Chair Kevin Warsh’s resistance to political pressure from President Donald Trump, who has pushed for lower rates despite elevated inflation. For housing professionals, early reactions suggest the hike may not immediately translate into worse lending conditions, although affordability remains strained. Fed officials entered the meeting with data showing consumer prices running hotter than ideal. The Consumer Price Index (CPI) rose 0.4% month over month in August, up from a 0.1% gain in July, driven largely by a 3.9% increase in gasoline prices. On an annual basis, inflation was up 3.4% in August. The labor market also remained firm, with the U.S. adding 162,000 jobs in August and the unemployment rate holding at 4.1%. The Federal Open Market Committee (FOMC) approved the hike in a unanimous 12-0 decision. “The Committee is continuing its policy of maintaining ample reserves ...