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% on Wednesday, its first hike since 2023, with quarterly projections signaling one more increase to 4.1% later this year.
- Kevin Warsh, Fed chair since May and a Trump appointee, declared "inflation is too high and has been for too long," reversing his earlier positioning during Senate confirmation when he suggested rates could fall in line with the president's preferences.
- Trump told a television interview in April he'd be "disappointed" if Warsh didn't cut rates; Warsh told the Senate Banking Committee the same day he'd be "an independent actor" as Fed chair.
- July inflation hit 3.7% per the Fed's preferred measure, up from 2.3% in April before Trump unveiled sweeping tariffs; core inflation rose to 3.3%, up from 3% just before the Iran war.
- Iran war disruptions pushed average gas prices up more than 7% from a month ago, feeding the broader inflation pressures the Fed cited in its statement.
- Kevin Hassett, Trump's top economic adviser, told Fox News the president "will defend the independence of Kevin Warsh above all" despite likely displeasure at the hike.
- Goldman Sachs analyst Kay Haigh said the Fed will likely skip its October meeting due to its proximity to the midterm elections; Wall Street investors are forecasting three total hikes this cycle.
Why it matters: A hike landing seven weeks before midterms directly affects affordability — the top voter issue — raising mortgage, auto loan, and credit card borrowing costs against 3.7% inflation and 7%+ gas price spikes. Trump's own appointee defied the president's explicit rate-cut demand, and Warsh's billionaire father-in-law Ronald Lauder, a major Trump donor, appears to be providing political insulation from retaliation.
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