The Federal Reserve of the United States (Fed) raised its benchmark interest rate by a quarter of a percentage point on Wednesday, to a range of between 3.75% and 4.00%, in a decision that may increase borrowing costs for millions of consumers and contradicts President Donald Trump's repeated demands to lower the rates.
This is the first rate hike since 2023, implemented by the Fed in response to inflation that remains significantly above its 2% target, reported the agency AP.
The president of the central bank, Kevin Warsh, justified the measure by stating that price pressures have been elevated for too long.
"The reality is that inflation is too high and has been for too long," Warsh stated. "We must be certain that underlying inflation is clearly approaching our target and at a sufficient pace."
"Today, the FOMC decided that this requirement is not met," he added.
The decision was unanimously supported by the members of the Federal Open Market Committee (FOMC). In its previous meeting, held at the end of July, the Fed had kept interest rates unchanged, with three officials voting in favor of raising them.
The situation has been further complicated by the conflict with Iran, which has put new pressure on energy prices. The national average for gasoline has increased by more than 7% over the past month.
"There is no way to escape the hotspots of conflict around the world," noted Warsh.
What does the increase mean for our wallets?
The rise in interest rates may gradually result in more expensive credit, particularly for those who carry balances on credit cards or need to finance the purchase of a vehicle.
It also arrives at a challenging time for those seeking housing. Buying a house in the United States has become more difficult, amid high mortgage costs and property prices that continue to pressure buyers.
The rise also puts Warsh in a politically uncomfortable position in front of the very president who nominated him to lead the Federal Reserve.
Trump has been calling for much lower rates for months, and during Warsh's confirmation process, he made it clear publicly that he expected cuts.
Warsh, however, assured the Senate Banking Committee that he had not promised the president to lower interest rates and that he would make his decisions independently.
When reporters asked him on Wednesday what reaction he expected from Trump after authorizing the first increase in three years, he replied: "I have nothing to say to him about a possible conversation with the president."
Hours later, Trump again called for a drastic reduction in rates.
“The interest rates in the United States should be 1% or less because we are the best credit in the world. Lower the interest rates for the United States, and do it quickly!” wrote the president on Truth Social.
The pressure from the presidency contrasts with the signals sent by the Fed itself.
In its new projections, 16 of the 18 officials from the central bank who provided estimates anticipated at least one more increase before the end of 2026, while four projected two additional hikes.
If these movements materialize, the reference rate could end the year around 4.1%.
Preston Caldwell, chief economist for the United States at Morningstar, stated that "Warsh's tough tone in the press conference following the meeting suggests that he may be pushing for interest rate hikes in future meetings."
The next decision will come at the end of October, just a week before the midterm elections, in a context where the cost of living continues to be one of the main economic concerns for Americans.
For now, the decision made this Wednesday sends a clear signal: the Federal Reserve believes that containing inflation requires maintaining a more restrictive monetary policy, even in the face of pressures from the White House to lower borrowing costs.
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