The Federal Reserve raised the federal funds rate by 25 basis points to a target range of 3.75% to 4.00%. It marked the Fed’s first rate hike in three years and its first under Chair Kevin Warsh.

The Federal Open Market Committee (FOMC) unanimously approved the decision. In its statement, the Fed said domestic demand and consumer spending remained resilient, while inflation continued to run high. Officials said tighter monetary policy was needed to bring inflation back to the 2% target more quickly.

The latest “dot plot” indicated that the Fed could raise rates by another 25 basis points later this year. However, geopolitical developments continue to create significant uncertainty for the economic outlook.

At a press conference, Warsh said policymakers were dissatisfied with the current pace of inflation. He stressed that inflation remained too high and had persisted for too long, making price stability the Fed’s top priority. However, he declined to provide details about future interest-rate decisions.

Fuel prices have surged amid the war in Iran, increasing costs for American consumers and businesses. Warsh acknowledged that the Fed alone could not prevent price shocks caused by oil and other commodities.