Key facts
- The Federal Reserve raised interest rates by 0.25% to a range of 3.75%-4.00%.
- Most Fed policymakers expect at least one more rate hike this year.
- Fed Chair Kevin Warsh stated inflation control is the central bank's top priority.
- The FOMC voted unanimously for the quarter-point hike.
- Stocks recovered on Thursday after an initial market tumble following the rate hike.
The Federal Reserve increased its benchmark interest rate by 0.25% to a range of 3.75%-4.00%, signaling a continued commitment to combating inflation. Fed Chair Kevin Warsh underscored that controlling inflation remains the central bank's paramount concern, noting that underlying economic trends have not improved.
Most policymakers on the Federal Open Market Committee (FOMC) anticipate at least one additional rate hike by the end of the year, with four members suggesting two increases might be necessary. The unanimous decision to raise rates was supported by all 12 members of the committee, including Warsh, who was appointed by President Donald Trump in May.
Despite the Fed's action, President Trump publicly expressed his desire for lower interest rates, posting on social media that rates should be 1% or less. However, he notably refrained from criticizing Fed Chair Warsh directly, a departure from his previous clashes with former Fed Chair Jerome Powell. White House spokesperson Kush Desai characterized the rate hike as an 'unfortunate decision' from the administration's perspective but affirmed the president's commitment to the Fed's independence.
Warsh defended the decision, stating that inflation has been too high for too long and that the move was a 'sober, serious, responsible decision.' He emphasized the Fed's role in maintaining stable prices and maximizing employment, while also asserting the central bank's independence by stating, 'The Federal Reserve is we stay in our lane.'
Following the announcement, US stocks experienced initial turmoil but rallied on Thursday. The Fed's projections indicate that rates are expected to remain at the new level through 2027 after the anticipated additional hike.