Donald Trump lashed out at the Federal Reserve after it defied his persistent calls for lower interest rates and instead raised its key interest rate on Wednesday for the first time since 2023, in an attempt to quell elevated inflation. The federal funds rate now ranges between 3.75 to 4%. A rate hike counters Trump’s steady campaign last year against Powell, whom he appointed in 2018, to pressure him to significantly lower interest rates.
For months, the President attacked and insulted Powell, and the Trump Administration went as far as opening a criminal investigation over the Fed executive’s alleged mismanagement of the central bank’s $2.5-billion renovation project. Powell’s chair term ended in May, though he remains on the Board of Governors. Warsh’s appointment was expected to end Trump’s feuding with the Federal Reserve, but he defended the decision to buck Trump on borrowing costs.
While Trump has previously said that he would support Warsh’s independence, his message on Truth Social showed his disappointment over the decision to increase the interest rate, mirroring statements he made when Powell was Fed Chair. He also alluded to threats he previously made of cutting off a big chunk of U.S. trade if interest rates weren’t reduced, despite the two being largely unrelated. The word ‘Deficit’ is nothing more than a fancy word for LOSS.
We are ‘carrying’ almost every country in the World, and that cannot go on any longer.” Speaking to reporters Wednesday, Trump maintained that he still had confidence in Warsh as Fed Chair, and said the Fed’s board members are the ones acting “hostile” and “political” with the rate hike. We let people that do trade policy and fiscal policy stay in their lane too.” The Fed’s goal is to maintain economic conditions that maximize employment and achieve stable prices. Inflation—or the rate at which consumer prices rise—soared particularly during the COVID-19 pandemic, although the following years have seen inflation draw closer to the target annual average of 2%.
But Trump’s White House return has threatened to bring an increase to the cost of consumer goods as he tried to implement sweeping tariff regimes against many of the U.S.’s trading partners. In February, when the U.S. and Israel jointly launched a war with Iran, inflation rose even more as a result of higher energy prices stemming from supply disruptions in the Strait of Hormuz and the Red Sea. In August, inflation reached a year-on-year rate of 3.4%, compared with 2.4% in February.
The Congressional Budget Office in a recent report said that it projects the Iran war to add about 0.5 percentage points to inflation in the price index for personal consumption expenditures in the first quarter of next year. Price increases have repeatedly plagued U.S. consumers, especially at the pump, where the national average price for a gallon of gasoline has hit $4.43 up from $3.20 a year ago, data from the American Automobile Association shows. A Fed statement issued along with Warsh’s announcement said that, in line with delivering price stability, the rate hike would “support a timelier return” to the 2% inflation goal.
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