United States of America

Fed Hikes Rates to 4%, Defying Trump's Calls for Cuts

Is the this a vital show of independence against inflation or a self-inflicted recession risk in an oil shock?

Published SEP 16

Fed Hikes Rates to 4%, Defying Trump's Calls for Cuts

Story

Above: U.S. Fed chairman Kevin Warsh in Washington, D.C. on Sept. 16. Image credit: Andrew Harnik/Getty Images

The Facts

The U.S. Federal Open Market Committee voted 12-0 to lift the target range for the federal funds rate by a quarter point from 3.75% to 4% on Wednesday, saying that the move supports a "timelier return" to its 2% inflation goal.
Federal Reserve Board
Fox Business
This was the first increase in more than three years, following the Fed's decision to leave rates unchanged at its first five meetings of this year. In a statement, the Fed said that economic activity is expanding at a "solid pace" and domestic spending has been "resilient."
Federal Reserve Board
Al Jazeera
International Business Times
New quarterly projections showed 16 of 18 policymakers expect at least one more quarter-point hike by year-end, which would take the rate just above 4%. Only two saw rates holding at the current level.
Reuters
The Wall Street Journal
This increase came despite U.S. President Donald Trump's repeated public demands for cheaper borrowing. Trump selected Chairman Kevin Warsh partly in expectation of rate cuts.
The Guardian
Daily Wire
Consumer prices rose 0.4% in August and 3.4% over 12 months, while core inflation climbed 0.3%, above forecasts. Fed projections do not show inflation returning to the 2% target until 2029, a year later than previously estimated.
Reuters
International Business Times
Al Jazeera
Also, diesel averaged a record $6.31 a gallon Wednesday and gasoline $4.37, according to AAA, while the 10-year Treasury yield topped 5% this week for the first time in 19 years and 30-year mortgage rates neared 7%.
Bloomberg
CoinDesk
The Wall Street Journal
CBS News

Sources Split

LEFT

CENTER

RIGHT

ESTAB
CRIT

CENTER

PRO
ESTAB

The Spin

Narrative A

This is exactly what an independent central bank is supposed to do — fight inflation instead of flattering the White House. A unanimous 12-0 vote and a quarter-point hike show that the committee reads the data rather than the political mood. Holding steady after markets priced a hike at 92% would have pushed yields higher and torched credibility.

Peter B on X

Mohamed A. El-Erian on X

Chris D. Jackson on X

Narrative B

An oil supply shock can't be fixed with interest rates, and this small hike proves the point. Higher rates produce zero extra barrels, zero refining capacity and zero repaired supply chains, while squeezing credit card borrowers, builders, manufacturers and a government refinancing trillions in debt. Punishing American enterprise for an energy crisis invites a recession.

Steven Fiorillo on X

JB and family on X