The Federal Reserve just made a move President Trump clearly did not want.

In a unanimous 12-0 vote Wednesday, the Federal Open Market Committee raised its benchmark interest-rate range by a quarter point, taking it from 3.50%-3.75% to 3.75%-4.00%.

It was the Fed’s first rate hike since 2023 — and the first policy change under Chairman Kevin Warsh.

The decision landed only days after President Trump again argued that the United States should have the lowest interest rate in the world.

This was not a divided committee reluctantly splitting the difference. Every voting member backed the increase.

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The Federal Reserve said economic activity is expanding at a “solid pace,” while domestic spending has remained resilient despite elevated geopolitical uncertainty.

Its statement also pointed to strong productivity growth, robust capital investment, steady job gains and little change in the unemployment rate. Those conditions gave policymakers room to tighten credit without describing the economy as being in a downturn.

But inflation remains above the Fed’s 2% target. The committee said the hike was intended to support a faster return to price stability after price pressures accelerated again this year.

The vote also raised the rate paid on reserve balances to 3.90% and the primary credit rate to 4.00%, both effective September 17.

The Fed directed its New York trading desk to keep the federal funds rate inside the new range. It also maintained its policy of preserving ample reserves in the banking system.

The statement was unusually direct about the goal. Fed officials said they intend to deliver price stability after years of inflation running above target.

The political collision is impossible to miss.

President Trump had spent months pressing the central bank to lower borrowing costs. On Sunday, he told reporters that America’s economic strength should translate into the lowest interest rate anywhere in the world, regardless of the Fed’s formulas.

Warsh was President Trump’s pick to lead the central bank. Yet in his first rate move as chairman, he joined every other voter in approving an increase.

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The Fed does not believe the economy is weak. Its own language says the opposite.

The concern is that inflation has remained stubbornly high even while growth and investment have held up.

CBS News reported that the increase was the first since July 2023 and pushed the target range to its highest level since December 2025. Economists and investors had widely expected Wednesday’s move.

The report noted that the Fed’s preferred inflation fight is now being complicated by surging energy prices tied to the Iran war. Higher fuel costs are feeding through to transportation, groceries and other everyday expenses.

For households, the immediate concern is familiar: higher benchmark rates can eventually make credit cards, auto loans, personal loans and other borrowing more expensive.

Banks are expected to respond by raising rates on credit cards and other lending products. Even a modest increase hits families already paying more for gasoline, groceries and housing.

The full effect will take time to reach every loan. The direction is unmistakable: cheaper money is not the Fed’s priority right now.

New Fed projections added another warning for borrowers and markets.

A majority of officials now expect one more rate hike before the end of 2026. Future decisions still depend on inflation, employment and other incoming data, but the projection shows where the committee’s center of gravity has moved.

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The median projection puts unemployment at 4.1% by year-end. Officials also raised their inflation outlook, with the median estimate now showing 3.7% overall inflation and 3.4% core inflation for 2026.

If the projection holds, the Fed would raise rates once more and then keep them steady through 2027.

That leaves President Trump and Warsh on opposite sides of the most consequential economic question facing the country: whether America needs cheaper credit to keep growth roaring, or tighter money to force inflation back down.

On Wednesday, Warsh and the entire FOMC chose the inflation fight.

This is a Guest Post from our friends over at WLTReport. View the original article here.

 

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