President Trump Wanted A Rate Cut — The Fed Gave Him A Rate Hike

The Federal Reserve unanimously raised its benchmark interest rate by a quarter percentage point Wednesday, rebuffing President Donald Trump’s calls for lower borrowing costs.

The Federal Open Market Committee lifted the target range for the federal funds rate from 3.5%-3.75% to 3.75%-4.0%. It was the central bank’s first rate increase in more than three years, going against Trump’s calls to lower interest rates.

“Lower the interest rates,” Trump said. “Because the U.S.A. is a much stronger credit than it was just a short time ago.”

Trump says the United States’ strength should translate into lower borrowing costs. The Fed, however, is confronting inflation that has remained above its 2% objective for more than five years.

Year-over-year inflation held steady at 3.4% during the 12 months ending in August, as monthly price growth accelerated on higher energy costs, according to data the Bureau of Labor Statistics released last week. The higher numbers were driven primarily by higher energy costs as oil prices rose amid rising tensions in the Middle East. 

Fed Chairman Kevin Warsh told Congress in July that policymakers would remain focused on bringing inflation under control.

“The members of our committee have no tolerance for persistently elevated inflation,” Warsh said. “And we share a resolute commitment to restoring price stability.”

Warsh explained recent inflation is hurting the American people.

“It has been a tax on the American people and businesses. We plan on getting rid of that tax,” he said. “That means we need a regime change in policy, and we need new consideration of practices, some of which have been working, some of which haven’t.”

President Trump has previously blamed other Federal Reserve officials rather than Warsh for policy decisions in which he disagreed.

“They have a board and Kevin’s fantastic, but he’s got a board and the board members are very political, I would say,” Trump said when asked about the central bank in July. “I know what he wants to do, but you need the consent of some people that have, perhaps, bad intentions.”

Days after Trump’s comments, Warsh praised his colleagues and emphasized unity.

“I am truly lucky to work with colleagues so capable and mission-focused and so determined like I am, to sharpen the performance of the Federal Reserve,” he said. 

“Not one of my FOMC colleagues is under any illusion. We have begun a new chapter and we understand that the 5+ years of inflation above target cannot be cured in 9 weeks or by a single month of modest price decreases.”

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