Fed Raises Rates 0.25 Point as Inflation Stays Above 3.4%
Updated
Updated · The Guardian · Oct 26
Fed Raises Rates 0.25 Point as Inflation Stays Above 3.4%
3 articles · Updated · The Guardian · Oct 26
Summary
A quarter-point rate hike in September marked the Fed’s first increase since 2023, reversing months of holding steady as officials assessed the economic fallout from the Iran war.
Inflation drove the move: after falling to 2.4% in January and February 2026, it jumped to 4.2% in May and has remained above 3.4%, with Fed Chair Kevin Warsh saying prices are still too high.
Oil has been a key pressure point after the Strait of Hormuz was blocked, pushing average US gasoline to $4.32 a gallon in mid-October, about $1.30 higher than a year earlier.
Higher borrowing costs are already feeding through to households, with 30-year mortgage rates climbing back above 7% after dipping below 6% in February.
The hike lands in a split economy: unemployment is just above 4% and stocks have surged on AI spending, but only 181,000 jobs were added in 2025 and many voters still say high prices feel recessionary.