The Federal Reserve raised its benchmark interest rate on Wednesday.

This is the first increase since 2023.

The quarter-point rise lifts the Fed’s key rate to about 3.9%.

Over time, it could raise borrowing costs for mortgages, auto loans and credit cards.

The Fed also signaled that its rate-setting committee could raise the rate again to 4.1%.

Chair Kevin Warsh said inflation is too high and has been for too long.

He said the Fed must be confident that underlying inflation is moving toward its 2% target.

He added that renewed fighting between the U.S. and Iran has pushed up gas prices.

This helped convince officials to support rate hikes.

Preston Caldwell of Morningstar said Warsh’s tough talk suggested he may push for higher rates in coming meetings.

President Donald Trump criticized the decision.

He accused the Fed’s policymakers of acting politically.

He said they were raising rates to make him do as badly as possible.

Warsh said other central banks are also raising rates.

The European Central Bank raised its key rate last week.

The Bank of Japan is expected to do the same on Sept. 18.

The Fed next meets in late October.

Most economists expect rates to stay unchanged then, because it is a week before the midterm elections.

Wall Street analysts now see a rate hike by December as nearly certain.

Inflation was 3.7% in July compared with a year earlier.

That is up from 2.3% in April 2025.