The Federal Reserve under Chair Kevin Warsh raised its benchmark interest rate by 25 basis points on Wednesday, lifting the federal funds target range to 3.75%–4% in the central bank’s first hike since 2023. The Federal Open Market Committee approved the move in a unanimous 12-0 vote, despite President Donald Trump’s demand for rates around 1% or lower.
Trump sharply criticized the broader Fed board, calling policymakers “a bunch of politicians” and saying they were “doing the wrong thing,” while maintaining that he still backs Warsh personally. The president said he had spoken with Warsh before the decision and told him: “You might as well vote with the board because it’s just not going to matter.” Warsh declined to comment on the conversation, but defended the hike by saying inflation remains too high and recent data had not convinced him that underlying trends had improved.
Markets focused on the Fed’s hawkish tone as much as the rate move. Warsh described the increase as removing a degree of accommodation, implying policymakers do not yet see policy as clearly restrictive. Updated projections showed 16 of 18 officials expect at least one more quarter-point increase before the end of 2026.
Analysts echoed that interpretation. Morgan Stanley’s Michael Gapen said policymakers “have some work to do” if they do not view policy as restrictive while oil remains elevated, and Morgan Stanley shifted toward expecting additional tightening. Evercore ISI’s Krishna Guha called Warsh’s press conference “coherent, confident and consistently hawkish.” Wells Fargo Investment Institute’s Brian Rehling said the dot plot showed rates could “move higher and remain elevated for longer than investors previously expected.”
The White House called the decision “a rather unfortunate decision” not backed by a compelling economic case, while Democrats framed the hike as evidence that Trump’s economic policies have failed. The clash leaves a wide gap between the president’s preferred benchmark of 1% or below and the Fed’s current, more hawkish path.
