President Donald Trump demanded the Federal Reserve cut interest rates to 1% or lower on Wednesday, hours after Fed Chair Kevin Warsh announced the central bank's first rate hike since 2023, lifting rates to 3.75%-4%.
The Federal Open Market Committee's decision was unanimous. Updated projections show 16 of 18 officials expect another rate increase before year-end, a shift from the committee's July outlook.
Trump's Pressure Campaign
Trump expressed his frustration on Truth Social shortly after the announcement, arguing that the United States deserves near-zero borrowing costs given its creditworthiness. He also claimed that cutting trade with surplus countries could add at least $1.5 trillion annually to federal coffers.
The demand reopens a dispute Trump had previously pursued with Warsh since the Fed chair took over from Jerome Powell. Trump had previously threatened to cut off trade with surplus countries if the Fed did not ease policy, a threat that would affect many of the country's largest trading partners.
White House spokesman Kush Desai told Fox News that Trump still "absolutely" believes in the Federal Reserve's independence, despite his public pressure campaign.
Fed's Policy Rationale
The Federal Open Market Committee removed language blaming supply shocks for part of inflation, now arguing that the rate hike supports a quicker return to the central bank's 2% inflation target.
Market Response
Bitcoin's price moved higher in the minutes following Wednesday's decision, though it remained down for the day overall. Gold spiked at the same time before relinquishing its gains.
