Fed Raises Rates in Unanimous Vote, Defying Trump
The Federal Reserve has raised its benchmark interest rate by a quarter point to a range of 3.75% to 4%, according to a report published by Euronews on September 16, 2026. This decision marks the central bank’s first increase since July 2023, ending a pause that had persisted since December. The move was approved in a unanimous 12-0 vote by the Federal Open Market Committee, a result that places Chair Kevin Warsh at direct odds with US President Donald Trump, who appointed him. The White House had spent months demanding rate cuts, while regional presidents had previously pushed for hikes, creating pressure from both extremes.
Chair Warsh broke away from the President’s expectations in his first major policy move, securing full committee support. The Federal Open Market Committee lifted rates after holding them steady at 3.5% to 3.75% for several months. The decision comes as energy costs have pushed prices higher, making the previous pause increasingly difficult to justify. Notably, no member dissented, signaling strong internal consensus despite external political pressure. At the time of the announcement, market reaction remained muted, likely because the hike was widely anticipated given the economic indicators.
President Trump reacted negatively on social media immediately following the decision, stating that "interest rates in the United States should be 1%, or less [...]". In contrast, the Fed’s communication was strikingly concise, consisting of only three short paragraphs with no forward guidance. The statement read: "Inflation remains elevated," adding that "today's policy action will support a timelier return to the Committee's 2 percent goal." The use of the word "timelier" implicitly admitted that the return to target had been too slow. Furthermore, the Committee used the definitive phrase "The Committee will deliver price stability," rather than the usual "seeks to" or "is committed to," underscoring their resolve.
The economic assessment described an economy in good health, with activity expanding at a solid pace and domestic spending remaining resilient. Productivity growth was labeled "strong" and capital investment "robust," while job gains kept pace with the workforce. However, uncertainty remains elevated due to "geopolitical developments," a formulation referring to the Iran war. By describing robust economic conditions, the Committee removed the argument that higher rates would damage growth, which is precisely the case President Trump has been making. The preferred gauge of inflation, the personal consumption expenditures index, ran at 3.7% in June and July, with core inflation at 3.3%. Consumer prices held at 3.4% in August, but the monthly increase of 0.4% was the sharpest since May, evidence that the energy shock is feeding through.
Inflation has now been above the 2% target for more than five years. Warsh had effectively committed himself to this path at Jackson Hole in August, warning that unless underlying inflation moved to target clearly and at sufficient speed, the Fed had "work to do." Markets took him at his word, with the CME’s FedWatch tool putting the probability of a rate hike above 90% before today’s decision. The new dot plot shows 12 of 18 officials expect another 0.25% hike by year-end, taking rates to 4.125%, while four see rates reaching 4.375%. The hawkish signal extends well beyond 2026, with 14 officials seeing rates ending 2027 above today’s level. This decision could also have a restoring effect on the perceived independence of the Federal Reserve as an institution, especially as the Justice Department opened a criminal investigation into testimony given by predecessor Jerome Powell.
This report was produced in the Europe Brief News newsroom.
