Fed Raises Rates to 3.75%-4% in First Hike Since 2023, Defying Trump's Demands for Cuts

The Federal Reserve raised its benchmark interest rate by a quarter percentage point on Wednesday, September 16, lifting the federal funds rate from a range of 3.5%-3.75% to 3.75%-4%. This marks the central bank's first rate increase since 2023, and it came against the explicit wishes of President Donald Trump, who has spent months demanding the opposite.

The vote was unanimous, 12-0, according to TIME. That includes Fed Chair Kevin Warsh, whom Trump appointed in May to replace Jerome Powell specifically because he expected a friendlier relationship with the central bank.

What the Fed Said

Warsh didn't soften the message. "The plain fact is that inflation is too high and has been for too long," he told reporters, according to TIME. He called the hike "a sober decision, serious decision, responsible decision, one that we have been preparing for and thinking about in my 110 or 120 days here."

When asked about his conversations with Trump on the matter, Warsh said he had "nothing" to share, per TIME.

The committee is also projecting another quarter-point increase later this year, according to TIME, with rates expected to hold at that level through 2027.

The Inflation Numbers Behind the Move

The hike follows a Bureau of Labor Statistics report, released September 11, showing consumer prices rose 0.4% in August after a 0.1% increase in July. Year-over-year inflation held at 3.4%, according to the Daily Wire, more than a point and a half above the Fed's 2% target.

Gasoline drove most of the monthly jump, rising 3.9% and accounting for more than a third of August's price increase, per the Labor Department data cited by Epoch Times. Broader energy costs, including electricity and home heating fuel, climbed 2.1% for the month. Housing costs rose 0.3%.

Breitbart reported that at the Fed's July meeting, three of the twelve voting members, a quarter of the committee, dissented from the decision to hold rates steady and pushed for an immediate hike. KPMG chief economist Diane Swonk told Breitbart the September move was "not a surprise," saying inflation had "spread across the economy and is becoming embedded in consumer and firm behavior, exactly what the Fed must prevent."

Trump's Case, and the Pushback

Trump's argument, repeated for months, is straightforward: the U.S. has the world's best credit, so it should have the world's lowest borrowing costs. "We should have the lowest interest rates in the world," he told the Daily Signal on September 14, arguing that other countries "pay less interest rate only because of us, because they do business with us." He's made the point that a stronger economy should mean a better credit rating, which should mean lower, not higher, rates.

The Fed cites what it says is happening on the ground: inflation above target for more than five years, according to Warsh's own July remarks to Congress, and now accelerating on the back of energy prices tied in part to tensions in the Middle East and Trump's own tariff policy, per Breitbart. Higher diesel prices, which Epoch Times noted had hit $6.23 a gallon, feed directly into shipping and production costs across the economy.

Within hours of the vote, Trump posted on Truth Social: "Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World, BY FAR... LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!" He also revived a threat to cut trade with countries running trade surpluses with the U.S., a claim TIME noted has little direct connection to interest-rate policy.

Speaking to reporters afterward, Trump said he still backs Warsh but blamed the broader FOMC board, calling its members "hostile" and "political." "I'm relying on Kevin, but he's got, you know, a very tough board," Trump said, according to TIME. "I talked to Kevin, and I said, 'You might as well vote with the board 'cause it's not going to matter.'"

National Economic Council Director Kevin Hassett had signaled ahead of the meeting that the White House would "understand and respect the decision" even if it went against Trump, per Breitbart, while predicting the president would "have an opinion about it."

The Pattern Continues

This isn't the first time Trump has tangled with the Fed over rates. His administration opened a criminal probe into Powell's handling of a $2.5 billion renovation project and has separately sought to remove Fed Governor Lisa Cook, according to TIME and Breitbart. Warsh's own Senate confirmation drew accusations from Democrats that he'd act as a "sock puppet" for Trump, a charge he denied.

Wednesday's unanimous vote, including Warsh's own, complicates that narrative. The open question now is whether the Fed follows through on the second quarter-point hike it has projected for later this year, and whether Trump escalates his public pressure campaign as borrowing costs rise heading into the November midterms.