Global Economic — 2026-09-17

Federal Reserve Raises Interest Rates for First Time Since 2023 Defying Trump

BLUFWarsh's unanimous hike and hawkish forward guidance make it likely the Fed raises rates again by year-end 2026, prioritizing inflation credibility over White House pressure.

The Federal Open Market Committee voted 12-0 on Wednesday to raise the federal funds rate a quarter point to a range of 3.75%-4%, the first increase since July 2023 12. The Fed cited elevated inflation, which reached 3.4% in August as war-driven oil and gasoline prices climbed, with diesel hitting a record $6.31 a gallon 3. Fed Chair Kevin Warsh told reporters "the plain fact is that inflation is too high and has been for too long" and said the FOMC's confidence standard on returning inflation to target "has not been satisfied" 24. Updated FOMC projections showed 16 of 18 participants expect at least one more rate hike this year 2. Trump, who has pushed for lower rates, wrote afterward "LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!" and said the rate "should be 1% or less" 4.

Analysis
Warsh's unanimous hike signals the Fed will tolerate slower growth and market volatility to defend its credibility against war-driven inflation, deepening the rift with the White House over monetary policy independence. The Fed likely raises rates again before year-end 2026, as 16 of 18 FOMC participants project at least one further hike and Warsh explicitly declined to declare the inflation-return standard satisfied. Moderate confidence rests on the near-unanimous dot-plot projection and consistent forward guidance, offset by the Fed's history of reversing course under sustained political pressure. Persistent Iran-war energy costs and the diesel price surge give the Committee cover to keep tightening even as equity markets wobble. Trump's public demand for rates near 1% signals continued pressure but no mechanism to compel reversal.
7 sources
  1. Federal Reserve issues FOMC statement - Federal Reserve Board
  2. Fed rate decision September 2026: Rates rise to 3.75%-4% - CNBC
  3. The Fed raises interest rates for the first time in over three years - NPR
  4. Fed raises interest rates for first time since 2023, defying Trump as inflation mounts - NBC News
  5. US Federal Reserve raises interest rates for the first time since 2023 - The Guardian
  6. Fed Rate Decision: Raises Interest Rates as Warsh Bucks Trump - Bloomberg
  7. Fed raises interest rates for the first time since 2023 - CNN Business

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