Fed Hikes Rates to 4 Percent as Trump Denounces Hostile Policy

The Federal Open Market Committee’s move marks the first rate increase since 2023, signaling a departure from the steady-state policy held since January. Warsh characterized the 25-basis-point hike as a necessary response to price pressures that have remained stubbornly elevated, fueled by energy shocks from the ongoing war in Iran, aggressive tariff policies, and the rapid expansion of the AI sector. According to the latest Summary of Economic Projections, at least 12 of the 18 participating policymakers expect further tightening before the year concludes.

Diane Swonk, chief economist at KPMG, noted that the resilience of the labor market and broader economy provided the Fed room to act, despite the political firestorm. While the White House has targeted the central bank’s independence through unprecedented administrative and legal pressure, the Fed has adjusted its year-end forecasts, now projecting PCE inflation to reach 3.7 percent and GDP growth to hit 2.3 percent. Markets reacted with typical volatility; 10-year Treasury yields climbed past the five-percent threshold as investors reassessed the long-term outlook for inflation and borrowing costs.