US Fed raises rates to battle inflation in move likely to rile Trump

Markets, which had largely priced in Wednesday’s rate hike, welcomed the decision without showing much movement on Wall Street’s main indexes.

Yields on 10-year US Treasury bonds – which have surged in recent days as uncertainty on long-term inflation has spiked – were also little changed.

The fresh hike will be sure to anger Trump, who has launched an unprecedented campaign to pressure the independent central bank to lower rates in order to spur economic activity.

The Trump administration launched a criminal probe against Warsh’s predecessor Jerome Powell – whom the president regularly insulted and berated – and is still trying to fire Fed Governor Lisa Cook.

On Tuesday, key Trump economic advisor Kevin Hassett advocated against a rate hike but said the White House would “understand and respect the decision.”

Warsh was named to his position after a contentious Senate confirmation process, where Democratic lawmakers accused him of being a “sock puppet” for Trump, which he denied.

So far, Trump has supported Warsh, claiming that the Fed chair wants lower rates and accusing the board of being “political.”

The Fed has a dual mandate to deliver maximum employment while keeping inflation to its long-term two-per cent target.

It mainly achieves these goals by setting the key US interest rate – lower rates tend to spur economic activity but fuel inflation, and hiking them cools both activity and prices.

The Fed’s SEP showed that at least 12 of 18 policymakers who participated in the projection expected one more rate hike would be required before the end of the year.

Four policymakers expect two more rate hikes to be required.

Warsh has criticized the Fed’s policy of offering such projections in the past and did not participate in the previous iteration in June. 

This projection also included only 18 policymakers, suggesting he had once again withheld his contribution.