‘Inflation is too high and has been for too long,’ says Kevin Warsh as Fed announces rate hikes – live

Major US indexes turned lower as Kevin Warsh’s comments came to an end earlier, with the S&P 500 down 0.9%, the Dow tumbling by 850 points and the Nasdaq down 0.5%.

Meanwhile, US treasury securities were mixed. The 2-year yield, most sensitive to expectations for future Fed policy, rose six basis points to 4.725% after earlier declining. The 10-year yield was up one basis point at 5% and the 30-year yield was down 1.6 basis points at 5.347%.

And the US dollar index rose 0.6% to 100.25.

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Donald Trump has still yet to speak but at least one Republican has come out against the Fed’s decision.

“With the economy growing, businesses hiring and investing, and inflation at less than half the rate American families endured under President Biden, interest rates should be coming down, not going up,”therepresentative Jason Smith of Missouri, who leads the top tax committee in the House, said in a statement.

“American workers, families, and small businesses have waited long enough for relief from high borrowing costs that make it harder to buy a home, start a business, or get ahead. This is the wrong decision for working families that will only prolong the high costs they are paying.”

And further to his statement, which we brought you earlier, Democrat Brendan Boyle, the ranking member on the House budget committee, says on X:

The Federal Reserve just raised interest rates because Donald Trump’s tariff taxes and Iran war have sent inflation soaring. It’s been over two years since Trump promised to lower costs on ‘Day One.’ Instead, he’s done the exact opposite.

Today’s decision to raise interest rates was “inevitable”, says Richard Carter, head of fixed interest research at Quilter Cheviot, “with energy prices taking a renewed step higher and inflation remaining persistently well above target”.

He added:

This is a pivotal moment for Kevin Warsh too. He was brought into the Fed as Trump’s guy, poised to deliver the rate cuts he so desperately wants. However, his first move of significant impact is in fact an interest rate rise, and this risks hampering the relationship between the two and thus a repeat of the barbs Jerome Powell suffered during his tenure.

Warsh will be hoping this action is swift, although energy prices are ultimately what is driving inflation right now rather than what is going on within the US economy.

In a note to investors, Stephen Brown, chief North America economist at Capital Economics, said:

The Fed appears to be on board with our view that its hike today will be followed by one more later this year. While the latest Summary of Economic Projections implies that the Fed may be content with just two hikes in total, we judge that Fed officials are underestimating the potential for the unemployment rate to decline, meaning we are sticking with our forecast for a third hike in early 2027 as well.

“I love the inflation,” Donald Trump infamously said back in June, arguing that price rises were just temporary and would drop sharply once his war on Iran was concluded.

But the war continues and so do high gas prices. Warsh earlier made the case that prices are too high: “The plain fact is that inflation is too high, and has been for too long. This summer’s inflation readings do not tell me that underlying trends have a meaningfully improved.”

Warsh stresses that the central bank’s decision to raise interest rates was not influenced by financial markets.

We made this decision today based on our assessment of the situation. I’ll observe market prices and see what they have to say. But today was our decision.

Taking questions from reporters, Warsh has declined to comment on Donald Trump’s repeated calls for rates to be cut, not raised.

“I’ve got nothing for you on a discussion with the president,” he replied to one reporter.

Later, when another reporter brought up Trump’s threats to cut off trade with certain countries, and asked Warsh when he last spoke to the US president, if he anticipates a post-decision meeting and if this is another test to the Fed’s independence, he reiterated:

You gave me a long menu from which to choose, they’re all very tempting. I don’t have anything for you on discussions with the president. And I am not a Wall Street newsletter.

Part of the independence of the Federal Reserve is we stay in our lane. Independence is a two-way street. We will let people that do trade policy and fiscal policy stay in their lane. That is the way we can stand up here and call them the way we see them.

Warsh adds of the rate hike: “Those who are least well off have the most to gain from a durable expansion, a solid labor market and stable prices.”

“At our July meeting, we all agreed that inflation remained too high, and we expressed our joint readiness to act as circumstances might require,” Warsh says.

“And a good majority of my colleagues and I thought the wiser course then would be to weight new information in the inter-meeting period.

“In the last month in Wyoming, I expressed my commitment to a monetary policy discipline, not to a decision. I defined the standard for action. We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.

“Today the FOMC decide that this standard has not been satisfied.”

Yet, for more than five years, inflation has been running above target, Warsh goes on, so the Fed’s predominant focus is on the price stability side of its mandate.

The plain fact is that inflation is too high, and has been for too long.

He adds: “This summer’s inflation readings do not tell me that underlying trends have meaningfully improved.”

“One basic sign of strength is the state of America’s labour markets,” Warsh says, highlighting the low unemployment rate, rising weekly hours and the relatively low rate at which people are filing for unemployment benefits.

The labour side of the Fed’s congressional agreement is in good shape.

“Our decision comes at a time when the American economy appears to be strengthening,” Warsh says.

Citing consumer spending, capital investment and other indicators, he adds:

Consider the geopolitical landscape of shocks and uncertainty, and you begin to appreciate the resilience of the US economy.

Kevin Warsh is speaking now.

He starts off by reiterating what the committee released in its press statement. I’ll bring you all the key lines here.

Democratic congressman Brendan Boyle, who is the ranking member of the House budget committee, released this statement reacting to the news:

Today’s rate hike is further proof that Donald Trump and Republicans have failed on the economy. When Trump took office, inflation was falling. But just today, diesel hit the highest price on record. Trump’s reckless tariffs and disastrous war in Iran have sent prices soaring again, leading to the Federal Reserve decision to raise rates.

Donald Trump will undoubtedly try to blame anyone but himself for this rate hike. But if he wants to know who caused it, he should look in the mirror.