US Fed raises rates to tackle ‘too high’ inflation, irking Trump

On Wednesday, the US Federal Reserve increased interest rates for the first time since 2023, taking a stance against President Donald Trump's calls for lower rates. Federal Reserve Chairman Kevin Warsh, who was appointed by Trump, emphasized the necessity of combating inflation that has been "too high" for "too long." The Federal Open Market Committee unanimously decided to raise rates by 25 basis points, bringing rates to between 3.75% and 4.00%.

Warsh stated that the decision was serious, but deemed necessary. The decision may not be the last, as most Fed policymakers indicated at least one more rate hike was likely before the end of the year. The high consumer prices, which resulted from Trump's Iran war, tariff policies, and the AI boom, have burdened US households and businesses.

Reacting angrily to the decision, Trump demanded the Fed to lower rates "fast" in a social media post. The Fed has held rates steady since January, waiting to assess the impact of the war's energy price shocks and the influence of tariffs on prices. Analysts believe inflation forced the Fed's hand, as price pressures remain too elevated and persistent.

The Fed's forecast for the Personal Consumption Expenditures price index was raised by 0.1 percentage points to 3.7% by year-end, and GDP growth projection for the same period was increased by 0.1 percentage points to 2.3%.