The Federal Reserve raised interest rates Wednesday — a move that puts new Fed Chair Kevin Warsh squarely at odds with President Donald Trump’s demands for lower borrowing costs. The Fed raised its benchmark interest rate by a quarter percentage point, taking the federal funds target range from 3.50-3.75 percent to 3.75-4.00 percent. It was the Fed's first rate increase since 2023.
The decision came at the conclusion of the Federal Open Market Committee's two-day meeting, as policymakers weighed persistent inflation against other signs of economic weakness. The rate increase had been heavily anticipated by financial markets, but it marks a significant shift from the Fed's recent policy direction and comes despite Trump's repeated calls for lower rates. The Federal Open Market Committee met Tuesday and Wednesday, Sept. 15-16, with the rate decision announced Wednesday afternoon.
Warsh is scheduled to discuss the decision and the Fed's economic outlook at his post-meeting news conference. Investors will be watching closely for clues about whether Wednesday's increase is the beginning of a broader tightening cycle or a one-time move. Inflation remains above the Fed's 2 percent target, while higher energy prices have added to concerns about renewed price pressures.
Oil prices had climbed above $100 a barrel, complicating the Fed's efforts to bring inflation back toward its target. Warsh has also emphasized the importance of price stability since taking over as Fed chair. At the same time, the economy has shown signs of resilience.
U.S. retail sales rebounded sharply in August, rising 1.2 percent from the previous month, adding to evidence that consumer demand remains firm. Kevin Warsh became Federal Reserve chair in 2026 after being nominated by Trump to succeed Jerome Powell. Warsh previously served on the Fed's Board of Governors from 2006 to 2011, including during the financial crisis.
He has also worked at Morgan Stanley and served as a White House economic adviser. His first rate increase as chair comes at a politically sensitive moment, given Trump's longstanding preference for lower interest rates. The president does not set the federal funds rate, however.
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