<\/p>\n
The US Federal Reserve has raised interest rates by a quarter of a percentage point and signalled another increase later this year, moves aimed at containing inflation that will test Fed Chair Kevin Warsh\u2019s relationship with US President Donald Trump.<\/p>\n
\u201cWe removed a dose of accommodation so that financial and credit conditions would be more consistent with our ultimate objectives,\u201d Warsh said at a press conference following the decision.<\/p>\n
It was the US central bank\u2019s first rate increase since July 2023.<\/p>\n
In his remarks to reporters, Warsh reiterated his concerns about inflation, saying too many categories of goods and services were recording annualised price gains of more than 3% over six- and 12-month periods.<\/p>\n
\u201cThis summer\u2019s inflation readings do not tell me that underlying trends have meaningfully improved,\u201d he said.<\/p>\n
The Federal Open Market Committee voted unanimously on Wednesday to raise the benchmark federal funds rate to a range of 3.75% to 4%.<\/p>\n
Yields on short-dated US Treasuries rose alongside the dollar after the Fed decided to lift interest rates and forecast further action to rein in inflation.<\/p>\n
Two-year yields, which are the most sensitive to the Fed\u2019s policy rate, erased an earlier decline to trade at 4.71%, more than 10 basis points above their level before the announcement. Longer-term Treasuries lagged the move, with the 10-year yield remaining lower on the day at 4.97%.<\/p>\n
Rate projections<\/p>\n
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CONTINUE READING BELOW<\/p>\n
In a new set of rate projections released on Wednesday, Fed officials\u2019 median outlook for interest rates at the end of 2026 rose to 4.1% from 3.8%, signalling growing support for a series of rate increases.<\/p>\n<\/p>\n
Sixteen officials projected at least one additional increase this year, up from six in June who saw at least two total increases in 2026.<\/p>\n
The median projection for 2027 pointed to no additional rate increases next year. However, eight policymakers favoured moving another quarter of a percentage point higher by the end of 2027 from current levels.<\/p>\n
As in June, when Warsh declined to submit his own forecasts, only 18 of the 19 officials provided rate projections for 2026 and 2027.<\/p>\n
The rate increase came after the Bureau of Labour Statistics reported last week that core inflation had risen at a faster-than-expected pace in August. That added to growing concern that inflationary pressures may be broadening beyond the temporary effects of tariffs and the Iran war\u2019s impact on energy prices.<\/p>\n
Read:<\/p>\n
Trump said to call Warsh in latest signal of push to remake Fed
\nDemocratic lawmakers urge Fed\u2019s Warsh to disclose Trump calls<\/p>\n
With their decision to raise rates, policymakers also defied Trump, who recently threatened to escalate his trade wars if the Fed doesn\u2019t lower interest rates. On Sunday he repeated his argument that US borrowing costs should be the lowest in the world.<\/p>\n
Asked by a reporter what his message to Trump was, Warsh responded: \u201cI\u2019ve got nothing for you on a discussion with the president.\u201d<\/p>\n
Warsh warning<\/p>\n
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CONTINUE READING BELOW<\/p>\n
Warsh warned last month that inflation was not meaningfully slowing, opening the door to tighter monetary policy. Friday\u2019s inflation report prompted investors to view a rate increase as a near certainty.<\/p>\n
In the committee\u2019s post-meeting statement on Wednesday, officials again described inflation as elevated, while also portraying the economy in positive terms.<\/p>\n
\u201cProductivity growth is strong, and capital investment is robust,\u201d officials said. \u201cJob gains have kept pace with the workforce, and the unemployment rate has changed little.\u201d<\/p>\n
Read:<\/p>\n
Trump says Fed pick Warsh can get economy to hit 15% growth
\nGold rises above $4 400 as Trump comments ease inflation concern<\/p>\n
Officials repeated their commitment to price stability. But even with the rate increase, they pushed out by one year their expectation for when inflation would return to 2%. The median forecast now sees it reaching that level in 2029.<\/p>\n
Support for higher rates has been building gradually within the Fed throughout the year.<\/p>\n
At their July meeting, officials left rates unchanged, but three regional Fed bank presidents \u2013 Lorie Logan of Dallas, Beth Hammack of Cleveland and Neel Kashkari of Minneapolis \u2013 dissented in favour of a rate increase.<\/p>\n
Minutes from that meeting showed that many officials indicated that tighter monetary policy would be necessary if inflation did not decline.<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#Fed #raises #rates #signals #hike #inflation #persists<\/p>\n","protected":false},"excerpt":{"rendered":"
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