Fed Raises Rates a Quarter Point; Trump Demands Cuts and Says U.S. Credit Merits 1%

The Federal Open Market Committee voted 12–0 on Wednesday to raise the federal funds target by a quarter percentage point, to a range of 3.75 percent to 4 percent, the first increase since July 2023 and the first rate move in either direction since a cut in December 2025. The decision was announced at 2 p.m. Eastern after a two-day meeting. Chair Kevin Warsh, whom President Donald Trump named to the job earlier this year, joined the unanimous vote. The Board of Governors separately raised the interest on reserve balances to 3.90 percent and the primary credit rate to 4.00 percent, both effective Sept. 17. “Inflation remains elevated,” the FOMC statement said. “Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.” The statement described economic activity as expanding at a solid pace, with resilient domestic spending, strong productivity, robust capital investment, and an unemployment rate that has changed little. It cited elevated uncertainty, including from geopolitical developments.

Warsh told reporters the increase was “a sober decision, serious decision, responsible decision” and that “the plain fact is that inflation is too high and has been for too long.” He declined to answer questions about the president’s rate views, saying, “I’ve got nothing for you.” Updated quarterly projections showed 16 of 18 policymakers who submitted dots expecting at least one more quarter-point hike by year-end, which would put the range at 4.00–4.25 percent. Two saw rates holding at the new level; four of the 16 penciled in two more increases. Warsh did not submit a personal dot. Officials also lifted near-term inflation forecasts. Markets had assigned more than 90 percent odds to a hike before the meeting. The last hike before Wednesday was in July 2023. Higher policy rates typically feed through over time to mortgages, auto loans, and credit cards.

Trump posted on Truth Social after the announcement: “Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR.” He added, “LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!” Speaking to reporters, he said rates were “too high” and “not appropriate,” described the Fed board as “very hostile” and “very political,” and said he had told Warsh he “might as well vote with the board because it’s not going to matter.” He did not attack Warsh by name the way he had previously targeted former Chair Jerome Powell. He has argued the United States should have the world’s lowest rates because of its credit standing and new investment. The midterms are seven weeks away. Affordability and borrowing costs are already campaign issues. The next FOMC meeting is in October. Futures markets after the statement priced a meaningful chance of another increase before Election Day. The Fed’s dual mandate is maximum employment and stable prices; its inflation target remains 2 percent.