The Fed Raises Interest Rates For the First Time in Three Years

Key takeaways

The Fed raised interest rates for the first time in three years, signaling a shift in monetary policy amid persistent inflation.
The Houthi rebels in Yemen seized control of a crucial oil chokepoint, increasing regional instability and impacting global oil prices.
Most business leaders oppose President Trump's view that AI risks are exaggerated, advocating for regulation and safety measures in the AI industry.
The U.S. is planning a significant military aid package to Israel, reflecting ongoing strategic support despite geopolitical tensions.

Summary

Federal Reserve's First Interest Rate Hike in Three Years

The Federal Reserve raised interest rates by a quarter percentage point, marking its first hike in three years. This decision was driven by strong labor market data and persistent inflation above the 2% target. The move faced some political scrutiny, especially regarding the independence of the Fed from President Trump's influence, as he preferred lower rates. Despite expectations for future hikes, the Fed's committee, through the 'dot plot,' indicated most officials believe at least one more rate increase this year is likely. The market responded negatively, with stocks declining and bond yields rising, especially in bank stocks and the 10-year Treasury yield.

Yemen's Houthis Capture a Strategic Oil Chokepoint and Escalate Regional Tensions

Houthi rebels in Yemen claimed responsibility for shooting down a Saudi fighter jet and seized control of the Bab al-Mandeb Strait, a critical 18-mile-wide waterway that connects the Red Sea to the Gulf of Aden. This strategic move has increased global oil prices and added new complexity to the Yemen conflict, which involves Iran-backed factions. The Houthis operate with guerrilla tactics, launching missiles and drones from mobile platforms, and have been able to withstand numerous military efforts against them. Their control of this key choke point threatens regional stability and disrupts oil supplies, with potential ripple effects on global markets.

Business Leaders Depart from President Trump's View on AI Regulation and Military Aid to Israel

Amid ongoing debates on AI safety and regulation, most business leaders in Washington disagree with President Trump's assertion that AI risks are a hoax. A majority believe that AI pose significant dangers and support regulation, with industry leaders from outside Silicon Valley calling for cautious approaches. Notably, Nvidia's Jensen Wong and Meta's Mark Zuckerberg emphasized the importance of engineering solutions and corporate responsibility for AI safety. Additionally, the U.S. government is planning a substantial $2.8 billion arms sale to Israel, including bombs and bunker-busting warheads, reflecting continued support despite political tensions and changing public opinion about aid to Israel.

Show notes

P.M. Edition for Sept. 16. The Federal Reserve unanimously decided to raise interest rates a quarter percentage point today, its first rate hike in three years. WSJ economics reporter Matt Grossman discusses what went into that decision, what it means for the Fed’s relationship with President Trump and what to expect from the Fed’s future meetings this year. Plus, Yemen’s Tehran-backed Houthi rebels claimed they shot down a Saudi fighter jet. We hear from the Journal’s deputy Middle East bureau chief Jon Gambrell about how the Houthis recently seized Bab al-Mandeb Strait, a crucial oil chokepoint, after sitting out months of the Iran war. And business leaders are taking sides in the debate around AI regulation—mostly in opposition to President Trump. Alex Ossola hosts.

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