U.S. Fed hikes rates, defying Trump’s demands for a cut — SkimNews
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- Federal Reserve raised its benchmark interest rate by a quarter point to about 3.9% Wednesday—the first hike since 2023—with quarterly projections signaling another increase to 4.1% later this year.
- Chair Kevin Warsh justified the hike by citing inflation at 3.7% in July (well above the 2% target), core inflation at 3.3%, and renewed U.S.-Iran combat that has pushed gas prices up more than 7% in a month; "there's no hiding from hotspots around the world," he said.
- The rate hike was unanimous among policymakers, compared to July's hold when three officials dissented for higher rates; 16 of 18 expect at least one more hike this year, with four projecting two more increases.
- Donald Trump publicly called for lower rates in a social media post Wednesday, but his own appointee Warsh defied that pressure—in April, Warsh told the Senate Banking Committee he would be "an independent actor" as Fed chair.
- The 2-year Treasury yield rose to 4.74% from 4.67% after the announcement; Wall Street analysts now see a December rate hike as a near certainty, though most expect October's meeting—a week before midterms—to leave rates unchanged.
- Kevin Hassett, Trump's top economic adviser, told Fox News the president "is not going to be super happy about it, but he will defend the independence of Kevin Warsh above all."
Why it matters: Americans already struggling with grocery, gas, and housing costs now face higher borrowing costs on mortgages, auto loans, and credit cards just seven weeks before midterm elections where affordability is a leading issue. Warsh—a Trump appointee—defying the president's public rate-cut demands with unanimous FOMC backing preserves Fed independence, but the explicit link to Iran-driven gas spikes means every escalation in that conflict now feeds directly into U.S. monetary policy.
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