INTERVIEW: Why has the US Federal Reserve raised interest rates? And what are the effects?

For the first time since 2023, the US Federal Reserve board has voted to raise interest rates. The Fed also flagged further increases in borrowing costs in coming months, with new US central bank chief Kevin Warsh joining a unanimous decision that effectively acknowledges the Trump administration's inability so far to control inflation. While President Donald Trump had promised to lower prices on his watch, the combined impact of his global import tariffs, an energy shock following the start of the US-Israeli war with Iran, and capital spending from the artificial intelligence boom has kept price pressures intense enough that the Fed felt it needed to raise its benchmark overnight interest rate by a quarter of a percentage point, putting it into the 3.75-to-four-per-cent range. Economist Jill Cetina of the Texas A&M University Mays Business School explains this unanimous decision and the impact it can have on the economy.