Federal Reserve Chairman Kevin Warsh told markets yesterday that the central bank’s rate-setting committee had unanimously agreed on a 25 basis point interest rate hike to combat inflation.
President Trump heard something different: He believes it’s a personal attack.
The U.S. base rate now sits at 3.75% to 4%, a quarter-percentage-point increase in the opposite direction of the downward trajectory Trump has been aggressively lobbying for. Warsh, whose critics feared would be a “sock puppet” for the White House, backed the decision of the Federal Open Market Committee (FOMC), saying: “The plain fact is that inflation is too high and has been for too long.”
The agreement to increase the base rate, combined with Warsh’s commitment to bringing inflation to the Fed’s 2% target, will go some way to reassure skeptics that the central bank remains—as is legally mandated—credibly independent.
