The Fed Bucks Trump and Raises Interest Rates — SkimNews
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- Kevin Warsh, installed by Trump as Fed chair in May to lower rates, presided over a unanimous quarter-point rate hike Wednesday — the first in three years — driven by persistent inflation.
- Federal Reserve officials signaled at least one more hike later this year and additional increases in 2027, with Warsh declaring "inflation is too high and has been for too long."
- August inflation hit 3.4% annually, far above the Fed's 2% target, driven by crude oil surging past $100/barrel amid the Iran war, U.S. tariffs, and AI-related investment pressures.
- Houthi rebels intensified attacks on the Bab el-Mandeb waterway this week while Saudi Arabia curtailed oil shipments to Europe after a pipeline disruption, pushing U.S. diesel to record highs above $6.30/gallon.
- Kevin Hassett and Trump pressured Warsh not to hike ahead of midterms, with Trump floating additional tariffs if the central bank refused to lower borrowing costs.
- The Congressional Budget Office concluded the Iran war's energy impact will sustain higher inflation into early 2027, and Warsh acknowledged rate hikes can do little to fix external supply shocks like war and tariffs.
Why it matters: U.S. borrowers face higher costs on mortgages, car loans, and business loans for at least another year. The Fed under Warsh — Trump's own appointee — demonstrated independence by hiking over explicit White House objections, even as diesel at $6.30+ and the Iran war create energy-driven inflation that rate hikes alone cannot fix.
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