Fed Raises Rates for First Time Since 2023, Defying White House Pressure

WASHINGTON -- The Federal Reserve raised its benchmark interest rate by a quarter percentage point Wednesday, the first increase since 2023, directly rejecting months of public pressure from President Donald Trump and his administration to hold or cut.

The Federal Open Market Committee voted 12-0 to lift the federal funds target range to 3.75%-4%, according to a statement released by the Board of Governors at 2 p.m. EDT. The Board separately approved an increase in the primary credit rate to 4.0 percent, effective Thursday.

Chairman Kevin Warsh cited persistent inflation in explaining the decision. "Inflation remains elevated," the committee said in its post-meeting statement, adding that the rate action "will support a timelier return to the Committee's 2 percent goal." August inflation data showed prices rising at a 3.4% annual clip, against the Fed's 2% target, according to NBC News.

At a press conference following the decision, Warsh was direct about the rationale. Inflation has been "too high ... for too long," he said, according to CNBC. He added that the committee must be confident underlying inflation is moving toward its objective "clearly and at sufficient speed."

The move puts Warsh on a collision course with the president who appointed him. Trump, writing on Truth Social hours after the announcement, said he still has confidence in Warsh but demanded the central bank slash rates to 1% "or less," according to CNBC.

The White House pressure campaign ahead of the meeting was broad. In the week before the decision, Trump called FOMC members "clowns," Vice President JD Vance said the Fed "should be lowering interest rates," and White House Council of Economic Advisers Chair Christopher Phelan told CNBC that raising rates would be a "mistake," according to CNBC reporting on the pre-meeting period. Treasury Secretary Scott Bessent argued the Fed typically doesn't raise rates during a supply shock absent second- or third-order inflationary effects.

Warsh declined to answer questions about his interactions with Trump at Wednesday's press conference. "I've got nothing for you on the discussion with the president," he said, as reported by CNBC.

Trump selected Warsh to lead the Fed in January and swore him in May 22, after souring on former Chairman Jerome Powell. The president had said in February that Warsh would not have been his nominee had he wanted rate hikes, a remark that drew immediate market attention at the time.

The Fed's dot plot, released Wednesday alongside the rate decision, showed eight officials favoring an additional hike in 2027, six preferring a hold, and four expecting cuts, according to CNBC. Bloomberg reported the Fed also penciled in a possible additional increase later this year.

Warsh offered limited forward guidance, repeating only that "this committee will deliver price stability," a phrase Foreign Policy noted hints at borrowing costs remaining elevated for at least the next year. U.S. equity markets rose after the announcement, while Treasury yields, already elevated, saw little additional movement.

The Fed had last raised rates in 2023, during the Biden administration's fight against post-pandemic inflation. The July 2026 meeting had ended in a hold, though three FOMC members at that session had voted to hike, according to CNBC. Wednesday's unanimous vote removed any such dissent.

National Economic Council Chair Kevin Hassett said before the decision that the president "will have an opinion" on any big rate move, while characterizing Trump as "respecting the independence of the Fed," as reported by NBC News.

Sources cited:
- Federal Reserve Board press release, Sept. 16, 2026 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm)
- Federal Reserve Board implementation note, Sept. 16, 2026 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20260916a1.htm)
- CNBC -- Fed rate decision September 2026 (https://www.cnbc.com/2026/09/16/fed-rate-decision-september-2026.html)
- CNBC -- Trump says he still has confidence in Warsh (https://www.cnbc.com/2026/09/16/trump-fed-interest-rate-warsh.html)
- CNBC -- How Trump could reignite the Fed independence fight (https://www.cnbc.com/2026/09/16/fed-interest-rates-kevin-warsh-trump.html)
- CNBC -- Trump turns up the heat on Warsh (https://www.cnbc.com/2026/09/05/trump-warsh-fed-september-rate-hike.html)
- NBC News -- Trump and the Federal Reserve on a collision course (https://www.nbcnews.com/business/economy/trump-federal-reserve-warsh-interest-rates-rcna597896)
- Bloomberg -- Fed raises rates as Warsh bucks Trump (https://www.bloomberg.com/news/articles/2026-09-16/fed-raises-rates-as-warsh-bucks-trump-to-contain-inflation)
- Foreign Policy -- The Fed bucks Trump and raises interest rates (https://foreignpolicy.com/2026/09/16/fed-interest-rate-hike-increase-trump-inflation/)
- CNN -- What Kevin Warsh said about the Fed's first rate hike since 2023 (https://www.cnn.com/2026/09/16/economy/fed-rate-decision-september)