The backdrop in which the U.S. Fed raised interest rate

On September 16, the U.S. Federal Reserve raised the short-term interest rate — its main policy rate, broadly comparable to the Reserve Bank of India’s repo rate — for the first time in three years, by 25 basis points from a range of 3.5% to 3.75% to a range of 3.75% to 4%.

The chart shows the short-term interest rate, also called the federal funds rate, seeing its first increase this month after being brought down a few times since 2023.

Coming ahead of the mid-term polls in the U.S., the interest rate hike disappointed supporters of President Donald Trump as its current Chair Kevin Warsh was handpicked by Mr. Trump, who has been vociferous in his opposition to increases in the interest rate.