The Fed voted unanimously to raise its interest rate target by 0.25 percentage points to a range of 3.75% to 4%.
Chairman Kevin Warsh said the central bank and the White House should keep their roles separate. 'Part of the independence of the Federal Reserve is that we stay in our lane,' he said. 'Independence is a two-way street.'
Warsh made the comments after the rate decision in Washington on Wednesday. He was asked about whether the move, made despite President Donald Trump’s lobbying for a rate cut, could be seen as a test of the Fed’s independence. Investors largely anticipated the increase.
The Washington Examiner also reported that inflation held at a 3.4% rate for the year ending in August, above the Fed’s 2% target. Fed officials said they see inflation, as measured by the personal consumption expenditures index, running at 3.7% by the end of the year.
The big picture: the Fed is signaling that it will not be steered by the White House. That matters because interest rates hit borrowers directly, from credit cards to mortgages, while the cost of political pressure falls on everyone else.
Why it matters: higher rates mean tighter money, more pressure on debt, and less room for Washington to pretend cheap credit is a free lunch. The bottom line: the central bank says it answers to inflation, not campaign-season demands.