Chairman Kevin Warsh drew a bright line between the Federal Reserve and the White House after the central bank raised interest rates in defiance of President Donald Trump.
Warsh, speaking at a press conference in Washington on Wednesday after the rate decision, was asked by the Washington Examiner about whether the decision to proceed with raising rates despite Trump’s lobbying for a rate cut could be seen as a test of the Fed’s independence. Warsh didn’t provide any details about conversations he had with the president.
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“Part of the independence of the Federal Reserve is that we stay in our lane,” the chairman said. “Independence is a two-way street. We let people that do trade policy and fiscal policy stay in their lane, too. That’s how we can stand up here and call them [the] way we see them.”
The remarks came after the Fed voted unanimously to raise its interest rate target by 0.25 percentage points to a range of 3.75% to 4%. Investors largely anticipated the move.
Notably, Warsh has not been attacked by Trump since the president nominated him to the role earlier this year. Instead, Trump has blamed the broader monetary policy-setting Federal Open Market Committee, given that all interest rate decisions come down to a majority vote.
The fact that Warsh also voted to raise interest rates signals that the Fed is fully committed to driving down inflation — even as Trump pushes for lower rates ahead of the midterm elections.
Also, ahead of this Wednesday’s rate decision, Trump threatened to cut off trade to countries with which the United States has a trade deficit if the Fed doesn’t lower interest rates.
Warsh’s predecessor, Jerome Powell, faced relentless pressure from the White House to lower interest rates — pressure that Warsh has not yet faced. Notably, Trump also appointed Powell to the Fed chairmanship.
Inflation held at a 3.4% rate for the year ending in August, the Bureau of Labor Statistics reported last week. That is well above the Fed’s target for 2% inflation, a goal that the central bank hasn’t met in years now.
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At the meeting, the Fed also updated its projections for inflation and other economic indicators such as GDP and unemployment.
Fed officials said they see inflation, as gauged by the personal consumption expenditures index, running at 3.7% by the end of the year. That is an increase from the board’s last projections in June, when it predicted inflation would fall to 3.6% by the end of 2026.