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Fed Raises Rates First Time Since 2023, Defying Trump's Push for Cuts

The Federal Reserve unanimously raised its benchmark interest rate by 0.25 percentage points to 3.75–4 percent on September 16, 2026, its first increase since 2023, citing elevated inflation and the need to prevent price pressures from broadening. The decision by all 12 FOMC members, including Trump-appointed Chairman Kevin Warsh, directly contradicts the president's calls for rate cuts and signals at least one additional hike before year-end.

Quick Facts

Federal Reserve raised benchmark federal funds rate by 0.25 percentage points
Rate increase to 3.75–4 percent range
Unanimous FOMC vote 12–0
Fed signaled at least one additional rate hike before end of 2026
Warsh acknowledged Fed cannot control energy and food prices directly

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The Federal Reserve raised its benchmark federal funds rate by 0.25 percentage points to a range of 3.75–4 percent on September 16, 2026, marking its first rate increase since 2023. The decision was unanimous, with all 12 members of the Federal Open Market Committee voting in favor, including Chairman Kevin Warsh, who was appointed by President Donald Trump earlier in 2026. The Fed stated that inflation remains elevated and that the rate hike will support a return to its 2 percent inflation target, while signaling at least one additional increase later in 2026.

Chairman Warsh acknowledged during a press conference that the central bank cannot directly control the primary inflation drivers, particularly energy and food prices, which have been key contributors to price increases. Instead, he framed the rate hike as a measure to prevent inflation from broadening across the economy. The decision directly contradicts Trump's prior calls for rate cuts and recent threats to impose new tariffs if the Fed did not reduce borrowing costs.

The Fed's statement emphasized that economic activity is expanding at a solid pace despite elevated uncertainty from geopolitical developments. The committee noted that domestic spending has remained resilient, productivity growth is strong, capital investment is robust, and job gains have kept pace with workforce growth. Bond market yields had surged in anticipation of the rate hike, with the 10-year Treasury yield reaching its highest level since 2007, placing implicit pressure on the Fed to act.

Market reaction was muted, with the S&P 500 rising 0.5 percent and the Nasdaq Composite gaining 0.9 percent following the announcement. Bond yields remained little changed after the decision. Market participants had priced in a 93 percent probability of the quarter-point hike prior to the announcement. The unanimous vote was viewed by some analysts as reinforcing Fed credibility on inflation management, though the rate increase will raise borrowing costs for Americans seeking mortgages, auto loans, and other credit products.

The decision presents a test of the relationship between Warsh and Trump, as the president appointed him expecting rate cuts rather than increases. The Fed's focus on long-term price stability and its dual mandate of controlling inflation and maximizing employment took precedence over the executive branch's stated preference for lower rates.

Topics

Economy Politics White House and Trump Economics Business World

#federal funds rate #economic growth #interest rates #employment #tariffs #Kevin Warsh #bond market #FOMC #Treasury yields #rate hike

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Why This Matters

The Federal Reserve's rate increase directly raises borrowing costs for mortgages, auto loans, and consumer credit, affecting household finances and business investment decisions. The unanimous vote, including by Trump's appointee, signals Fed independence on inflation control and may constrain fiscal flexibility if the administration pursues tariff or spending increases that could add price pressure. Bond yields have already moved sharply higher in anticipation; further hikes this year will influence global capital flows and competitiveness of US assets.

Timeline & Sources

Jan 1, 2023

Wire

Last federal funds rate increase prior to September 2026

Jan 1, 2026

Wire

Donald Trump appoints Kevin Warsh as Fed Chair; Trump expresses expectation for rate cuts

Sep 16, 2026

Wire

Jeffrey Rosenberg (BlackRock) comments on market repricing following Fed decision

Sep 17, 2026

Wire

Federal Reserve expected to announce quarter-point rate increase

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