Bank of England under pressure to raise interest after US central bank hikes rates for first time since 2023

The Bank of England is under pressure to raise interest rates after the US central bank hiked interest rates for the first time since 2023.

The decision was unanimous among Fed policymakers to raise rates, with all 12 voting in favour of a rise.

The Fed has increased its rate from 3.5 per cent-3.75 per cent to 3.75 per cent-4 per cent.

It is the first policy shift under the new Fed chief, who took office in late May after being selected by Mr Trump with an expectation that he would cut rates.

The rate increase was announced less than two months ahead of midterm elections that will determine whether Mr Trump's Republicans maintain control of Congress for the final two years of his presidency.

The Republicans are facing an uphill battle with voters angry about gasoline prices that are about a third higher than a year ago and interest rates on home mortgages that have been rising steadily this year amid the Iran war.

The average rate on a 30-year fixed-rate mortgage is approaching seven per cent.

Policymakers' new quarterly economic projections marked up estimates of inflation, as measured by the Personal Consumption Expenditures Price Index, to 3.7 per cent versus the 3.6 per cent projected at the Fed's June meeting.

Inflation is not projected to return to the two per cent target until 2029, a year later than previously expected.

Economic growth was marked up slightly from 2.2 per cent to 2.3 per cent, while the unemployment rate is seen ending the year at 4.1 per cent, versus the 4.3 per cent projected in June.

Federal Reserve Chairman Kevin Warsh said in a press conference following the Fed meeting when it came to lifting rates, "inflation remains elevated... Today's policy action will support a timelier return to the committee's two per cent goal".

He added: "I would be hard pressed to describe broad financial conditions as restrictive. This view was widely shared by the committee, so we removed a dose of accommodation."

The dollar rose against the euro after the Fed's announcement, while US Treasury bond yields held largely steady, having already weakened in anticipation of the hike.

After hitting a 19-year high above five per cent on Monday, the benchmark 10-year Treasury yield was trading at 4.958 per cent, compared to 4.946 per cent just prior to the announcement.

The 30-year bond yield dipped to 5.312 per cent after trading at 5.327 per cent just before the announcement.

Stocks were mostly higher, with the S&P 500 index up 0.3 per cent and the Nasdaq Composite up 0.7 per cent.

Our Standards: The GB News Editorial Charter