The Federal Reserve opted to raise interest rates by one-quarter of a percent, or 25 basis points, in a unanimous vote on Wednesday. It’s the first rate hike since 2023, when the Fed was responding to pandemic and supply chain disruption.
A recent Bureau of Labor Statistics inflation report showed prices heating up while President Donald Trump’s ongoing war in Iran shows no signs of slowing. For those reasons, the vast majority of financial market analysts and investors expected that voting U.S. central bankers would increase interest rates at their September committee meeting. Wednesday’s rate hike came even as employers added a healthy 162,000 jobs, according to BLS data released in early September.
The hike also comes as Trump has relentlessly sought to pressure central bankers to lower interest rates. Trump installed Kevin Warsh as Fed Chair after reportedly pressing him to lower rates, and the president continues to pursue legal action against sitting Federal Reserve Governor Lisa Cook over phony mortgage fraud charges.
More recently, Trump threatened to halt all trade unless the Fed lowered rates. The president appears to believe lower rates will, in part, improve affordability for families ahead of the midterms.
“Lower the interest rates because the U.S.A. is a much stronger credit than it was just a short time ago!” Trump wrote on Sept. 4 on Truth Social, the platform he owns and from which he’s sought to profit while president. “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT… BE PATRIOTS for a change.”
Wednesday’s hike reveals Warsh’s willingness to allow data, rather than politics, to influence his monetary policy decision making.
It was the first real test for Warsh since the central bank was expected to — and did — hold rates steady at its two previous committee meetings. Warsh’s nomination drew immediate criticism from progressive politicians and economists who were concerned about Warsh’s ability to remain independent from the president. And an April CNBC survey of market analysts and strategists found nearly half of those respondents doubted Warsh’s independence.
His short tenure at the central bank has already prompted raised eyebrows from investors. His long-standing philosophy that the Fed should offer fewer clues into its impending monetary policy decisions spooked people on Wall Street who rely on information from the Fed to conduct business.
By responding to persistent inflation by raising the short-term interest rate, central bankers want to decrease prices by increasing the cost of doing business and slowing down consumer demand.
Wall Street needs the central bank to operate on data — and separate from presidential politics — because the Fed’s dual mandate of protecting maximum employment and keeping inflation to its 2% target relies on data about employment, prices, and other economic indicators. If central bankers can’t be trusted to use facts and figures in their decisionmaking, they could make decisions that would work against their mandate, drive prices up (look to places like Argentina and Turkey as an example), and devastate the job market.
TK WARSH QUOTE.
Ahead of Wednesday’s decision, a group of economists on a press call organized by the progressive Groundwork Collaborative think-tank decried the Fed’s expected rate hike and instead pointed the finger at the Trump administration for its role in upending the economy. Trump’s war in Iran and tariff regime are responsible for higher prices and increased borrowing costs, the group said, and it’s actually the administration’s responsibility to fix it.
“The Fed’s toolkit was not built for this,” said Elizabeth Pancotti, vice president of policy, advocacy, and research at Groundwork Collaborative. “Interest rates can cool demand. They cannot lower a tariff, reopen a shipping lane, or bring down the price of a barrel of oil.”
Raising the federal funds rate will hike mortgage rates and make homebuying more difficult for the average family, or cause businesses to pull back on hiring or employment, putting the Fed in a tough spot, economists said.
“It would punish families for a problem they didn’t create,” Pancotti said. “The only way to bring prices down is to reverse the tariffs and end the war. The power to pull those levers sits with the president, not Chair Warsh.”
Trump has kept up his pressure campaign on the central bank with an eye toward the midterms, and with seemingly no regard for the state of the economy.
“Threats betray the speaker by proving that he has failed to influence events in any other way.”
“The hike also comes as Trump has relentlessly sought to pressure central bankers to lower interest rates. Trump installed Kevin Warsh as Fed Chair after reportedly pressing him to lower rates, and the president continues to pursue legal action against sitting Federal Reserve Governor Lisa Cook over phony mortgage fraud charges.”
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Trump should know something of fraud since was convicted in criminal court on 34 felony fraud related charges just before taking office. Therefore any sentencing is delayed until he is again out of office.
In his fantasy world trump wants to believe he alone controls world trade. He likes to babble that the Strait of Hormuz is open to all ships freely and that the Houthi militants on the other side of the Arabian peninsula are no threat to anybody cuz reasons. None of which is true. And the Saudi pipeline carrying crude from the east of the country to the Red Sea was bombed a couple days ago putting it out of service. Crude prices are rising. The root cause is Donald J. Trump and his fucking ego.
When politics and reality clash, reality often wins. Too bad, dump.
The rate hike was totally expected. Warsh can’t get past the ‘facts on the ground.’ More importantly, it’s not Warsh’s decision alone, since there are other votes on the board.
Trump is losing influence now, and, being on the downswing, his fury is going to consume him 24/7.
Strokes and heart attacks have been brought on by less.
“LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT… BE PATRIOTS for a change.”
For the record, Donnie doesn’t trade with anyone.