Fed, battling persistent inflation, ups rates 1st time in 3 years — SkimNews
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- Federal Reserve raised its benchmark rate 25 basis points to a 3.75%-4% range on a unanimous 12-0 vote, the first increase in three years, with Chair Kevin Warsh calling the decision "sober" and declaring, "inflation is too high, and has been for too long."
- Warsh said the Fed "cannot affect any individual price, whether it be oil prices, whether it be foodstuffs at the grocery store," framing the hike as preventing inflation from broadening rather than reversing the gas spike that drove August's 0.4% monthly CPI increase.
- Iran is driving the energy shock: a barrel of oil hit $105, gasoline averaged $4.37 a gallon, diesel hit a record $6.31, and US Central Command said it destroyed five Iranian crude oil carriers on Sept. 8 as part of a naval blockade in the Strait of Hormuz.
- Iran-backed Houthis resumed attacks on commercial vessels in the Red Sea for the first time since 2024, are fighting for control of the Bab al-Mandab strait, and have directly struck targets in Saudi Arabia, with the UN warning of a humanitarian crisis.
- Donald Trump spent months publicly attacking former Chair Jerome Powell for not cutting rates, attacks that escalated into a federal probe of the Fed over headquarters renovations before the administration dropped the investigation; Warsh declined to answer questions on the pressure, saying "we stay in our lane."
- Rep. Jason Smith (R-MO), chair of the House Ways and Means Committee, blasted the hike as "the opposite of the relief families and small businesses need," praising Trump's "big beautiful bill" tax law and blaming former President Joe Biden for elevated inflation.
Why it matters: Warsh's first rate hike lands as a 3.4% annual inflation rate keeps borrowing costs climbing for American households and small businesses, even as the Fed concedes it cannot reverse the Iran-driven oil shock — meaning rate-sensitive sectors like housing and autos face higher monthly payments with no near-term relief in sight.
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