U.S. Federal Reserve Chair Kevin Warsh announces that the Fed will raise its interest rate by .25 per cent, despite pressure from the president to lower it. <\/p>\n
WASHINGTON \u2014 The Federal Reserve raised its benchmark interest rate Wednesday for the first time since 2023 in an effort to quell stubbornly high inflation, and the central bank signalled another rate hike could occur later this year.<\/p>\n
The quarter-point increase lifts the Fed\u2019s key rate to about 3.9 per cent and, over time, could result in higher borrowing costs for mortgages, auto loans and credit cards. In a set of quarterly projections, the Fed also signalled its rate-setting committee could raise it a second time to 4.1 per cent.<\/p>\n
The move comes as Americans are already struggling with high costs for groceries, gas and housing. Affordability has taken on a leading role in the upcoming midterm elections, just seven weeks away.<\/p>\n
It adds another potentially dicey economic variable for Republicans and U.S. President Donald Trump, who blasted the decision Wednesday and accused the Fed\u2019s top policymakers of trying to hurt him politically.<\/p>\n
Chair Kevin Warsh, who was nominated by Trump, emphasized after the announcement that the economy has shown signs of gathering speed since the central bank decided to keep rates unchanged in late July. Inflation has also remained stubbornly above the Fed\u2019s two per cent target, and he noted there is little sign it is cooling.<\/p>\n
\u201cThe plain fact is that inflation is too high and has been for too long,\u201d Warsh said. \u201cWe must be confident that underlying inflation is moving to our objective clearly and at sufficient speed. Today the FOMC decided that this standard has not been satisfied,\u201d he added, referring to the policy-setting Federal Open Market Committee, an arm of the Fed.<\/p>\n
\u201cWarsh\u2019s tough talk around inflation in the post-meeting press conference suggested that he may be pushing for higher rates in meetings to come,\u201d said Preston Caldwell, chief U.S. economist at Morningstar.<\/p>\n
Warsh also said renewed combat between the U.S. and Iran, which has driven up gas prices, had convinced Fed officials to support rate hikes.<\/p>\n
\u201cThere\u2019s no hiding from hot spots around the world,\u201d he said.<\/p>\n
![\"\"](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2026\/09\/SODUONGCQJDRTOHBTHRIL2SEY4.jpg\")
Federal Reserve Board Chairman Kevin Warsh speaks during a news conference at the Federal Reserve in Washington, Wednesday, Sept. 16, 2026. (AP Photo\/Mark Schiefelbein) U.S. Federal Reserve Board Chairman Kevin Warsh speaks during a news conference at the Federal Reserve in Washington, Wednesday, Sept. 16, 2026. (AP Photo\/Mark Schiefelbein) The president lashed out at `a bunch of politicians\u2019<\/p>\n
Trump, speaking to reporters in North Carolina ahead of a midterm campaign rally, made no mention of his policies that influenced the decision, instead framing the historically independent Fed as another political actor in Washington.<\/p>\n
\u201cThe board is very hostile. They\u2019re very political. They\u2019re doing the wrong thing. They\u2019re a bunch of politicians,\u201d he said, adding, \u201cThey\u2019re raising rates to make Trump do as bad as they can possibly do.\u201d<\/p>\n
Warsh noted that other central banks are hiking interest rates in response to global turmoil and higher gas prices. The European Central Bank raised its key rate last week, and the Bank of Japan is expected to do the same Sept. 18.<\/p>\n
The Fed next meets in late October and most economists expect officials will keep rates unchanged then because it is just a week before the midterm elections. But Wall Street analysts now see a rate hike by December as a near certainty, according to futures prices.<\/p>\n
Also late Wednesday, the yield, or interest rate, on the two year Treasury rose to 4.74 per cent from 4.67 per cent, another sign investors expect the Fed to potentially lift rates further. Still, if inflation does show signs of cooling in the coming months, that could change.<\/p>\n
Since taking the lead at the Fed in May, Warsh has said it is firmly committed to taming inflation, and policymakers would take their cues from the data to determine if inflation was going in the right direction.<\/p>\n
The rate hike marks a turnaround for Warsh. He often suggested last year when under consideration by Trump that the Fed could reduce its key rate, echoing the U.S. president\u2019s call for lower borrowing costs.<\/p>\n
In April, when Warsh\u2019s nomination was under consideration by the Senate Banking Committee, Trump said in a television interview that he would be disappointed if Warsh didn\u2019t cut rates. On the same day, however, Warsh told the committee he did not promise Trump he would cut rates and said he would be \u201can independent actor\u201d as Fed chair.<\/p>\n
Trump said in North Carolina that he had talked to Warsh ahead of the vote and told him, \u201cYou might as well vote with the board because it\u2019s not going to matter.\u201d<\/p>\n
![\"\"](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2026\/09\/BQPHDSSG2EEDJ7FCTLSQZLTH6E.jpg\")
Federal Reserve Board Chairman Kevin Warsh speaks at a news conference at the Federal Reserve in Washington, Wednesday, July 29, 2026. (AP Photo\/Mark Schiefelbein) U.S. Federal Reserve Board Chairman Kevin Warsh speaks at a news conference at the Federal Reserve in Washington, Wednesday, July 29, 2026. (AP Photo\/Mark Schiefelbein) The fallout from Trump\u2019s war remains a factor<\/p>\n
The ongoing disruptions from the Iran war, which have pushed up average gas prices more than seven per cent from just a month ago, threaten to spread through the economy and keep broader inflation stubbornly high. An inflation report last week showed core prices, which exclude food and energy, accelerated a bit in August.<\/p>\n
According to the Fed\u2019s preferred measure, inflation was 3.7 per cent in July compared with a year ago, up from 2.3 per cent in April 2025, just before Trump unveiled sweeping tariffs. Core inflation, which excludes the volatile food and energy categories, was 3.3 per cent in July, the latest data available, up from three per cent just before the Iran war and far above the Fed\u2019s target.<\/p>\n
Fed policymakers unanimously supported the rate hike, compared with late July when the U.S. central bank kept rates steady and three officials dissented in favour of higher rates. Sixteen of the 18 Fed policymakers who submitted growth and interest rate projections penciled in at least one further rate hike this year, with four supporting two more increases.<\/p>\n
Earlier Wednesday, the government said retail sales jumped 1.2 per cent in August from the previous month, a sign that consumers are still spending at healthy levels despite sentiment surveys that indicate Americans remain gloomy about the economy. Strong spending is a sign that interest rates at current levels aren\u2019t necessarily restricting the economy and cooling inflation.<\/p>\n
\u201cWhile uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient,\u201d the Fed said, a likely reference to ongoing consumer spending and strong investment in artificial intelligence data centres by large technology companies.<\/p>\n
Higher inflation isn\u2019t all about gas prices. Ongoing investment in AI has driven up prices for computer chips and other electronic gear, adding to overall inflation. Tariffs may still be elevating some costs, such as appliances, which jumped in price last month.<\/p>\n
![\"\"](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2026\/09\/O4QZOSGAYLWOY4MFIDR4X3ERVQ.jpg\")
President Donald Trump speaks with reporters before boarding Air Force One at Shannon Airport, Sunday, Sept. 13, 2026, in Shannon, Ireland. (AP Photo\/Julia Demaree Nikhinson) U.S. President Donald Trump speaks with reporters before boarding Air Force One at Shannon Airport, Sunday, Sept. 13, 2026, in Shannon, Ireland. (AP Photo\/Julia Demaree Nikhinson) Warsh isn\u2019t the first Fed chairman caught in Trump\u2019s politics<\/p>\n
Trump had harshly criticized Warsh\u2019s predecessor, Jerome Powell, for not cutting rates quickly enough. Under Trump the U.S. Justice Department even launched a criminal investigation into Powell over brief testimony he delivered to Congress last year, though that probe was eventually dropped.<\/p>\n
When asked Wednesday how the U.S. president might react to the rate increase, Warsh said, \u201cI\u2019ve got nothing for you on a discussion with the president.\u201d<\/p>\n
On Sunday, Kevin Hassett, Trump\u2019s top economic adviser, was asked in an interview with Fox News how Trump might react to a rate hike.<\/p>\n
\u201cI\u2019m sure he\u2019s not going to be super happy about it, but he will defend the independence of Kevin Warsh above all,\u201d Hassett said.<\/p>\n
Warsh might have a measure of protection from the fact that his father-in-law Ronald Lauder is a friend of Trump\u2019s and a billionaire donor to his campaigns.<\/p>\n
The U.S. president, for all his complaints, insisted he wants Warsh \u201cto be independent.\u201d Asked explicitly whether he still has confidence in Warsh, Trump replied, \u201cI do.\u201d <\/p>\n
——<\/p>\n
Associated Press reporter Bill Barrow contributed from Atlanta.<\/p>\n
Christopher Rugaber, The Associated Press<\/p>\n","protected":false},"excerpt":{"rendered":"U.S. Federal Reserve Chair Kevin Warsh announces that the Fed will raise its interest rate by .25 per…\n","protected":false},"author":2,"featured_media":899097,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[45,49,48,77,714],"class_list":["post-899096","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-ca","tag-canada","tag-international","tag-politics"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/899096","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=899096"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/899096\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/899097"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=899096"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=899096"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=899096"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}