Fed raises rates for the first time since 2023
And 16 of 18 Fed governors and regional bank presidents anticipate another rate hike by the end of 2026.
• less than 3 min read
Everyone remembers their first…rate hike.
On Wednesday, the Federal Reserve’s Open Market Committee (FOMC) raised interest rates for the first time since 2023 and the first time thus far in Chair Kevin Warsh’s three-plus months’ tenure.
The quarter of a percentage point hike brings the Fed’s benchmark rate into a range of 3.75% to 4%. The decision was unanimous among all 12 Federal Open Market Committee members.
“The plain fact is that inflation is too high and has been for too long,” Warsh said in a press conference after the announcement. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Today, the FOMC decided that this standard has not been satisfied.”
In addition to inflation, Warsh said a strong labor market and the conflict in the Middle East, which has fueled high oil prices, also swayed the committee’s decision. Inflation has hovered above the Fed’s 2% target for over five years.
During that time, President Trump, who appointed Warsh, has frequently tried to pressure the historically independent Fed to lower interest rates. In the post-announcement press conference, Warsh side-stepped a question about Trump’s statements. “I’ve got nothing for you on a discussion with the president,” he said.
Others saw the Fed’s decision as a sign of fortitude. “Warsh and the committee are sending a clear message that the Fed will not tolerate inflation drifting further above target, even in the face of political pressure from the White House,” Brian Rehling, co-head of global fixed income at Wells Fargo, said in a statement, per CNBC.
While Wednesday’s rate hike decision was widely anticipated, it’s less clear what the committee will do from here. The Fed’s latest dot plot, which tracks FOMC officials’ borrowing costs expectations, showed that 16 of the 18 participants anticipated another rate increase by the end of the year.
Warsh, who has voiced disapproval of forward guidance, has declined to participate in the dot plot projections since stepping into the chair role.
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