Trump-Appointed Fed Chair Raises Interest Rates as Inflation Stays High

The Federal Reserve has raised interest rates for the first time since 2023, putting new pressure on the U.S. economy as inflation remains stubbornly above the central bank’s target.

The Fed raised its benchmark interest rate by 0.25 percentage point, bringing the target range to 3.75%–4.00%. The decision was unanimous.

The move comes under newly appointed Federal Reserve Chair Kevin Warsh, who was selected by President Donald Trump. Trump has repeatedly pushed for lower interest rates, arguing that cheaper borrowing would strengthen the economy.

Warsh, however, has emphasized that the Federal Reserve must focus on bringing inflation back toward its 2% target and make decisions based on economic data.

Inflation remains the problem

The Fed’s preferred inflation measure was running at 3.7% in July, substantially above its 2% goal. Core inflation, which excludes food and energy prices, stood at 3.3%.

Federal officials are also dealing with higher energy costs linked to the ongoing Iran conflict, while tariffs on imported goods have added to concerns about persistent price pressures.

The Fed indicated that another rate increase could come later this year, with policymakers projecting the benchmark rate could reach 4.00%–4.25% by year-end.

What it means for Americans

Higher interest rates generally make borrowing more expensive. Americans could face additional pressure from higher costs for mortgages, car loans and credit-card borrowing, although the broader impact depends on how financial markets and lenders respond.

At the same time, the Fed hopes tighter monetary policy will eventually reduce demand and help bring inflation down.

The decision creates a striking contrast with Trump’s repeated calls for lower borrowing costs. Warsh’s appointment had raised questions about whether the new chair would follow the president’s preferred direction, but Wednesday’s unanimous decision underscored the Fed’s stated independence.

With inflation still elevated and another possible hike on the table, the big question now is whether the Fed’s tougher approach will succeed in cooling prices without significantly weakening the U.S. economy.