Fed Raises: Warsh Defies Trump, Hikes Anyway
The Federal Reserve voted unanimously on Wednesday to raise its benchmark interest rate by 25 basis points — the first increase since July 2023 — and signalled at least one further hike before the year ends, according to Bloomberg and The Guardian.
Fed Raises: Warsh Defies Trump, Hikes Anyway
The Federal Reserve voted unanimously on Wednesday to raise its benchmark interest rate by 25 basis points — the first increase since July 2023 — and signalled at least one further hike before the year ends, according to Bloomberg and The Guardian. The decision puts Fed Chair Kevin Warsh in direct confrontation with President Donald Trump, who has publicly demanded the lowest interest rates in the world and nominated Warsh expecting accommodation he is not receiving.
The Fed's dot plot now points higher. Warsh, a former Fed governor and longtime ally of Wall Street, appears to have calculated that inflation — not political loyalty — is the crisis that cannot wait. The unanimous vote matters: no dissent, no cover for the White House to exploit.
US Treasuries held most of their gains after the announcement, suggesting bond markets had priced in the move but are watching the forward guidance more carefully than the hike itself. The Bank of Canada separately warned that elevated gasoline prices may force its own rate increase, a signal that North American central banks are moving in the same direction regardless of what their respective governments prefer.
The question now is whether Trump escalates — through public pressure, through threats to Fed independence, or through something the institutional architecture was not designed to survive. Warsh has made his position clear. The president has not yet made his.
One rate hike is a policy decision. The second one will be a test of something older and more fragile than monetary theory.
