The Fed hiked interest rates for the first time in three years — and President Donald Trump isn’t thrilled.
“Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR,” he wrote on Truth Social. “Our Country is BOOMING with new Investment!”
While Trump didn’t mention him by name in the post, Chair Kevin Warsh faced a massive test of Fed independence Wednesday. The Federal Open Market Committee voted unanimously to raise rates by a quarter point to foster stable prices. Inflation is stubbornly outpacing wage growth in the US and remains above the Fed’s 2% goal, largely due to supply shocks from the Iran War and flip-flopping White House tariff policies.
In quarterly economic projections, the committee also expects GDP growth to remain relatively strong, unemployment to hold steady, and inflation to stay above 2% through the rest of the year. A slew of members see another rate hike on the horizon.
Trump — who nominated Warsh to the chairmanship — has been vocal about wanting lower interest rates, a monetary policy route that would likely result in higher inflation and a climbing cost of living for Americans.
Congressional leaders, economists, and members of the FOMC have worried about how Trump’s policy pressure will shape a long nonpartisan central bank. With a hike, Warsh could see more flak from the White House.
Trump repeatedly pushed former Chair Jerome Powell to lower rates in the latter part of his term. Political pressure on the central bank culminated in a Department of Justice probe into Powell’s handling of construction at the Fed’s Washington DC buildings and a mortgage fraud case against Governor Lisa Cook that reached the Supreme Court.
Warsh declined to answer any questions about Trump during the September 16 press conference. He said Fed independence is “a two-way street.”
The central bank will stay in its lane, Warsh said, and lawmakers should stay in theirs.
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