Federal Reserve Raises Benchmark Rate to 3.75%-4% as Kevin Warsh Warns Inflation Remains Elevated

The Federal Reserve raised its benchmark interest rate on Wednesday by a quarter percentage point to a 3.75%-4% target range, with Chairman Kevin Warsh saying, "Inflation remains elevated," and that the policy action would support a "timelier return to the Committee's 2 percent goal."

“"Inflation remains elevated,"”

CNBC

CNBC reported the Federal Open Market Committee voted 12-0 to increase the key rate by 25 basis points, and Warsh said inflation has been "too high ... for too long."

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Reuters said new policy projections showed 16 of 18 policymakers anticipate at least one more quarter-percentage-point hike by the end of this year, while only two see rates remaining stable from here.R

Reuters also reported that Warsh again did not submit a rate projection, and that the Fed’s policy statement and economic projections opened the door to tighter policy through next year, with the policy rate rising to the 4.00%-4.25% range by the end of this year and ending 2027 at the same level.R

After the decision, Reuters described stocks and bonds selling off late Wednesday afternoon, with the S&P 500 down 1% and the Nasdaq down 0.7% as Warsh’s comments ended.R

NBC News framed the politics around the decision as a collision between President Donald Trump and the Federal Reserve, saying Trump had ratcheted up calls for an interest rate cut ahead of Wednesday’s meeting.

NBC News quoted Trump adviser Kevin Hassett saying, "The president will have an opinion about it," if the Fed makes a "big move" with rates, and it reported market odds for an interest rate increase Wednesday were at more than 90% on Tuesday after inflation data for August came in hot at a 3.4% annual clip.

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The Guardian reported Warsh told reporters, "The plain fact is that inflation is too high, and has been for too long," and it said major US indexes turned lower as his comments ended, with the S&P 500 down 0.9% and the Nasdaq down 0.5%.

In the same Guardian live coverage, Richard Carter of Quilter Cheviot said the decision was "inevitable" with energy prices taking a renewed step higher and inflation persistently well above target.

The Guardian also quoted Warsh declining to discuss the president, saying, "I’ve got nothing for you on a discussion with the president," as it described questions about the Fed’s independence.

Reuters said the Fed’s new policy statement and economic projections pointed to tighter monetary policy through next year, with the policy rate rising to the 4.00%-4.25% range by the end of this year and ending 2027 at the same level.R

“the policy rate rising to the 4.00%-4.25% range by the end of this year”

Reuters

The Guardian reported that Warsh stressed the Fed’s decision to raise interest rates was not influenced by financial markets, quoting him: "We made this decision today based on our assessment of the situation."

Reuters reported that the 2-year yield rose 7 basis points to 4.732% after earlier declining, while the 10-year yield was up 2 bps at 5.012% and the 30-year yield was down 0.5 bps at 5.357%.R

CNBC said the committee stated, "Today's policy action will support a timelier return to the Committee's 2 percent goal," and it reported Warsh said the standard for inflation moving to the Fed’s objective had not been satisfied.

In the Guardian’s live blog, Richard Carter said the hike was "inevitable" and Stephen Brown of Capital Economics said the Fed appears to be on board with its view that the hike today will be followed by one more later this year.