The United States Federal Reserve has increased its benchmark interest rate for the first time since 2023, with the move aimed at addressing inflation that has remained above the central bank’s desired level. Officials have also indicated that another increase may take place later this year.

The latest quarter point rise takes the Federal Reserve’s key interest rate to around 3.9 percent. The decision could gradually increase borrowing costs for Americans seeking mortgages, vehicle loans and credit card financing. The central bank’s quarterly projections also indicate that its rate setting committee expects the benchmark rate to reach around 4.1 percent through another increase.

The decision comes as households across the United States continue to face elevated expenses for food, fuel and housing. Concerns about affordability have also become an important issue ahead of the upcoming midterm elections, which are seven weeks away.

Speaking after the announcement, Federal Reserve Chair Kevin Warsh said the economy had shown signs of gaining momentum since officials chose to leave interest rates unchanged in late July. He also pointed to inflation remaining well above the Federal Reserve’s 2 percent target, with limited evidence of a significant slowdown.

Warsh said renewed fighting involving the United States and Iran, which has contributed to higher gas prices, was another factor considered by Federal Reserve officials when supporting the rate increase.

The Federal Reserve’s preferred inflation measure showed prices were 3.7 percent higher in July this year than during the same month a year earlier. This compares with an inflation rate of 2.3 percent recorded in April last year, shortly before former President Donald Trump announced wide ranging tariffs.

Following the Federal Reserve’s decision, Trump called for substantially lower interest rates. In a post on Truth Social, he argued that US interest rates should be reduced to 1 percent or below, saying the country needs less expensive credit.

Trump also linked his call for easier monetary policy to the US trade balance. He argued that the country could gain at least 1.5 trillion dollars each year by stopping trade with countries that maintain a trade surplus with the United States.