Fed Chair Warsh Defends Rate Hike to Trump

Federal Reserve Chair Kevin Warsh told reporters on Sept. 16 that the central bank's decision to raise interest rates was correct, a direct response to ongoing criticism from President Donald Trump. Warsh stated, "The decision we made today was the right decision," addressing questions from ABC News reporter Elizabeth Schulze about his stance on the president's calls for lower rates.

The Federal Open Market Committee (FOMC) voted unanimously, 12-0, to increase the federal funds target rate by 25 basis points to a range of 3.75%-4.00%. This move marks the beginning of the fourth interest rate-hiking cycle of the 21st century, a shift that comes after the FOMC enacted six rate cuts between September 2024 and December 2025. Warsh, who was sworn in as the 17th head of the Fed on May 22, led this policy pivot alongside his FOMC colleagues.

President Trump has frequently criticized the Federal Reserve for not lowering interest rates quickly enough since starting his second non-consecutive term in January 2025. The president argued that rates should be at or below 1%, a position he maintained despite the previous year of rate cuts. Trump suggested that lower lending costs would stimulate hiring and spending, particularly on artificial intelligence infrastructure build-out, which he identified as a leading catalyst for Wall Street. Additionally, he noted that lower borrowing costs would ease the burden of servicing America's total debt, which surpassed $40 trillion in August, and reduce the impact of persistent federal deficits through lower Treasury bond yields.

In a social media post following the meeting, Trump indirectly criticized Warsh for not voting against what he called a "very hostile" board. Trump claimed he told Warsh to "vote with the board" on the rate hike because "it's not going to matter," while stating he still had confidence in Warsh personally but went after the rest of the Fed.

Warsh's remarks following the Sept. 15-16 FOMC meeting indicated that the rate hike was justified by persistently elevated inflation. In his prepared statements, Warsh described the action as removing a "dose of accommodation," language that suggests further hikes may be necessary to achieve price stability. This stance contrasts with Trump's preference for aggressive rate cuts and serves as a signal to markets that the Federal Reserve intends to maintain its focus on controlling inflation.