Analysis: How Trump could reignite the Fed independence fight after Warsh’s rate hike

Analysis: How Trump could reignite the Fed independence fight after Warsh's rate hike. The vote renews attention on the relationship between the White House and the independent central bank. watch nowVIDEO0:4000:40How the White House could respond to Wednesday's rate hikePower LunchChairman Kevin Warsh's quarter-point rate increase sends an unambiguous message to President Donald Trump: Hands off the Federal Reserve.

What happened

Warsh on Wednesday voted with a unanimous Federal Open Market Committee to raise interest rates by a quarter-point, despite repeated urgings by Trump and his administration to cut or at least not hike. Asked on Wednesday about the message the rate hike sent to Trump, Warsh chuckled before saying: "I have got nothing for you on a discussion with the president. Before Wednesday's rate decision, Trump wrote off Warsh's decisions to hold interest rates steady — rather than cut — at FOMC meetings in June and July as the result of other Fed voters making political decisions.

Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuKey PointsPresident Donald Trump demanded the Federal Reserve slash interest rates to 1% "or less," hours after the central bank announced its first rate hike since 2023. The Fed, led by Trump-picked Chairman Kevin Warsh, earlier Wednesday afternoon raised benchmark interest rates a quarter percentage point, to a target range of 3. What the higher rate means for AmericansWhen he was confirmed, Democratic lawmakers had said Warsh would be Trump's "sock puppet" and many Fed watchers expected him to carry out Trump's persistent demands to slash rates.

Warsh declined to provide his own view on where he saw the Fed's rates going, but the majority of his fellow policymakers said they believe rates would be hiked again before the end of this year to between 4-4.

The wider picture

The Federal Reserve unanimously raised interest rates by a quarter point despite repeated calls from President Donald Trump for lower rates. Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuKey PointsThe Federal Open Market Committee unanimously raised interest rates by 25 basis points as Chairman Kevin Warsh cited inflation remaining above the Fed's 2% target. The decision came despite repeated public calls from Trump and administration officials for lower rates. Yet Warsh reviewed the economy and made up his own mind that interest rates needed to rise, despite the potential political consequences.

Warsh chuckled when asked by a reporter if he had a message for Trump and politely declined to answer. Massie seeks Hegseth’s impeachment over IranTrump calls Supreme Court mail ballot ruling ‘big loss for Republicans’White House spokesman Kush Desai said on Fox News after Warsh's press conference that he hadn't spoken to Trump, but said the president's desire for cuts was clear. "Certainly today's rather unfortunate decision by the Federal Reserve to hike interest rates was not, from the administration's point of view, backed by a particularly compelling economic case," Desai said.

Trump later seemed to address the Fed's decision in a Truth Social post that didn't mention Warsh by name.

What has been reported

"Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR," Trump wrote. Andrew Harnik | Getty ImagesTrump selected Warsh to run the Fed in January after souring on former Chair Jerome Powell, whom Trump appointed in his first term. Trump was furious at Powell for, among other things, voting to cut interest rates by a half-point in September 2024. Trump has said he trusts Warsh to make good decisions.

That position will be difficult to maintain now that Warsh has voted with the FOMC to raise interest rates. Trump and Warsh have a longstanding relationship, and the two men have spoken directly since Warsh took office, the president has said. If Trump doesn't like what Warsh is doing, there is much he can do beyond merely telling Warsh through one of those channels. Trump's Department of Justice also opened and then closed an investigation into Powell pending a separate inquiry by the Fed's inspector general into cost overruns in building renovations.

What happens next

If Trump takes any of those actions, it will end the administration's tacit truce on the Fed that has held since he picked Warsh. Trump has rekindled his pressure campaign against the Fed, which had temporarily subsided after Kevin Warsh succeeded Jerome Powell as chairman. But Trump, who has relentlessly pressured the Fed to drastically lower borrowing costs, insisted in his Truth post that rates in the U. Less than two weeks earlier, Trump threatened that if the Fed doesn't cut rates, he will cut off trade with countries that have trade surpluses with the U.

So far, however, Trump and his aides have refrained from attacking Warsh directly. White House spokesman Kush Desai told Fox News earlier Wednesday afternoon that Trump "absolutely" still believes in the independence of the Fed. 75% by the Federal Reserve in a unanimous decision, despite fierce opposition from President Donald Trump, who had called for rates to be cut.

The report has been compiled by The Daily Waves using information reported across cnbc.com, bbc.co.uk, marketwatch.com. Details are presented according to the information available at the time of publication and may change as authorities, organisers or other relevant parties provide updates.