The Federal Reserve raised interest rates by a quarter-point to 3.75%-4%, the first increase in three years, as President Trump denounced the move and demanded a massive cut. Fed Chair Kevin Warsh defended the decision, citing persistent inflation, while Trump insisted rates should be '1%, or less' due to his 'Best Credit' narrative.
Trump criticized the rate hike, calling it a 'massive cut' that would benefit the U.S. economy, and accused the Fed of being 'carrying' other nations. The decision comes as the Fed faces pressure to address inflation driven by rising oil prices linked to the Iran conflict, with Warsh emphasizing that 'inflation is too high and has been for too long.'
The rate increase could raise borrowing costs for Americans, making loans and mortgages more expensive, while also potentially slowing economic growth. Democrats warned the move would burden lower-income households, with Senate Majority Leader Chuck Schumer calling it a 'failure' to manage the economy under Trump's leadership.
Warsh dismissed Trump's criticisms, stating the decision was 'sober' and 'responsible,' and noted that inflation has remained above target for over five years. The Fed's move marks a return to tightening policy after a rate cut in December 2025, with major banks adjusting lending rates in response to the decision.