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Fed Hikes Rates: Warsh Affirms Price Stability as White House Cries Foul
The Federal Reserve raised its benchmark interest rate by 25 basis points, the first hike since 2023, drawing sharp criticism from the White House. Fed Chairman Kevin Warsh emphasized price stability as essential for economic growth, stating the…
The Federal Reserve increased its benchmark interest rate by a quarter percentage point, its first such move since 2023. White House spokesman Kush Desai immediately criticized the decision, calling it "unfortunate" and arguing it lacked compelling economic justification. Desai asserted that any remaining inflation was "entirely driven by an energy supply shock, by what’s going on with oil prices in the Middle East," issues he claimed were beyond the reach of interest rate policy. He added that higher rates would only "stymie the significant economic progress that the United States has made under this president."
Conversely, Fed Chairman Kevin Warsh maintained that "Price stability is foundational to economic growth, and I think we took an important step today to deliver it." Warsh acknowledged the Fed's inability to control individual commodity prices, such as oil or groceries, but emphasized the central bank's mandate to contain "second and third order effects" and prevent price shocks from spreading throughout the economy. This policy stance comes as fuel prices have surged, with diesel hitting record highs and Labor Day gas prices reaching their highest historical levels in the U.S.
Warsh declined to offer forward guidance on future rate decisions, stating, "I’m not in the forward guidance business." He clarified that the 25 basis-point rate hike was a "sober decision, serious decision, responsible decision" based on the Fed's assessment of employment and economic strength, not on market expectations. When asked about President Trump's calls for lower rates, Warsh offered no comment on their discussions.
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