Fed raises rates a quarter point in Warsh’s first move, and Trump demands 1%

The Federal Reserve raised interest rates by a quarter point on Wednesday, the first policy adjustment of Kevin Warsh’s chairmanship³. The 0.25% increase takes the target range to 3.75% to 4.00%^4,6. It is the first rise in three years¹⁰, and the decision was unanimous¹¹.

Warsh framed the move as overdue. “Inflation is too high and has been for too long,” he said as the decision was announced². The Fed also lifted its projection for growth by year-end to 2.3%, up 0.1 percentage points⁷, and its 2026 real growth forecast now stands at 2.3 percent while other projections were lowered⁸. Axios reported that the statement hinted the quarter point would not be the end of it³.

Why it matters to investors

The increase came despite fierce opposition from the president, who had spent a year calling for cuts⁴. Within hours Trump was demanding rates of 1% or lower⁶. He had told the Fed chief to “do what you want” before the meeting⁹, and afterwards he attacked the central bank while sparing Warsh personally⁵.

That distinction matters, because the pressure on the institution has not been rhetorical alone. The president has moved against a sitting governor, Lisa Cook, and endorsed a Justice Department criminal investigation of Warsh’s predecessor, Jerome Powell; Warsh himself was Trump’s pick, chosen in January^2,9. A unanimous vote to tighten against the White House’s stated wish is the cleanest evidence so far of where the committee sits¹¹.

What to watch

The question now is whether this was a single move or the start of a cycle. Richard Clarida, a former Fed vice chairman, said the Fed may not be “one and done” and pointed to the shift from the July stance to a unanimous decision to raise¹¹.

Watch the balance sheet as well as the policy rate. One of the central bank’s new task forces will focus on the balance sheet, which Warsh has long criticised as too large¹. That is a second lever, and it is one the new chairman has spent years arguing should be pulled.

And watch whether growth holds. One reading of the meeting is that the economy is resilient enough to absorb higher rates even with inflation still above comfort levels⁸. The Fed’s own revision points the same way, since the growth projection went up rather than down alongside the tightening⁷. If that view survives the next round of data, it is the case for further increases rather than against them, and it is why the press conference drew as much attention as the decision².