Chairman Kevin Warsh’s quarter-point rate hike would send a clear message to President Donald Trump: Don’t back off from the Fed.
On Wednesday, the Federal Open Market Committee unanimously voted to raise interest rates by a quarter of a percentage point, despite repeated calls from President Trump and his administration to cut rates, or at least hold off on raising them. These warnings continued after the FOMC met on Wednesday. But Warsh reviewed the economy and decided on his own that interest rates needed to rise, despite the potential political implications.
Warsh didn’t get into politics at the news conference, but said he was concerned that inflation remained above the Fed’s 2% target.
When asked by a reporter if he had a message for Trump, Warsh chuckled and politely declined to answer. “There is nothing about discussions with the president.”
White House Press Secretary Khush Desai told Fox News after Warsh’s news conference that he had not spoken to Trump, but said it was clear the president wanted cuts.
“Certainly, the Fed’s rather disappointing decision to raise rates today was not backed by a particularly compelling economic case from the administration’s perspective,” Desai said.
President Trump later appeared to mention the Fed’s decision in a post on Truth Social, which did not mention Warsh by name. “America’s interest rates should be below 1% because America is by far the most creditworthy country in the world,” President Trump wrote.
Mr. Trump nominated Mr. Warsh to the Fed board in January, dissatisfied with former Fed Chairman Jerome Powell, whom he appointed during his first term. Mr. Trump was furious over Mr. Powell’s vote to cut interest rates by 0.5 points in September 2024. Mr. Trump believed the decision was an attempt to undermine the incumbent Democratic administration in November’s presidential election. Mr. Powell at the time, like Mr. Warsh now, said he considered only the economy when making decisions.
President Trump said he trusts Warsh to make the right decision. People close to the president say Mr. Warsh could make the same decision as Mr. Powell and get a different response. Before Wednesday’s rate decision, President Trump overrode Warsh’s decision to hold interest rates unchanged rather than lower them at the June and July FOMC meetings, as a result of political decisions made by other Fed voters.
Mr. Warsh voted in favor of raising rates at the FOMC, so that position will be difficult to maintain.
Members of the Trump administration have argued that the Fed should not intervene in the economy now, citing its tradition of not intervening before midterm elections. This idea is not well supported by the historical record.
Since 1994, when the Fed began announcing changes to interest rate policy on the same day, the Fed has changed interest rates before elections in five election years: 1998, 2004, 2008, 2018, and 2022, with a similar or shorter period of time than now.
Some Democrats have complained bitterly since Mr. Warsh’s nomination that he would not be independent of the president who elected him. Wednesday’s interest rate decision suggests it may have been too early to judge him.
Mr. Trump and Mr. Warsh have a long-standing relationship, and the president said the two have spoken directly since Mr. Warsh took office. Mr. Warsh also meets frequently with Treasury Secretary Scott Bessent, and the two are friends.
If Mr. Trump doesn’t like what Mr. Warsh is doing, there’s a lot more he can do than just tell him through one of these channels.
President Trump tried to fire Fed Governor Lisa Cook in 2025. The Supreme Court blocked the lawsuit on the grounds that President Trump had not followed proper procedures. “At a minimum, Mr. Cook was entitled to some explanation of the evidence in question, some means of reply, and a deadline for reply,” the Supreme Court said.
President Trump restarted the process to fire Cook last month. The administration sent a letter to the Fed chief stating that President Trump is considering firing him and asking him to respond by Aug. 26. She sent a response and the ball is now in the administration’s court.
President Trump could fire Cook again at any time. This decision will likely need to be reviewed by the courts.
President Trump’s Justice Department also opened and later closed an investigation into Mr. Powell, pending a separate investigation by the Federal Reserve’s inspector general into building renovation cost overruns. The Justice Department said it reserves the right to reopen the investigation once the IG issues its report, which could be submitted at any time.
A consultant is representing the Federal Reserve investigating the 2023 failure of Silicon Valley Bank, the Fed’s regulator. Some analysts believe the investigation could give the administration an excuse to fire Michael Barr, the Fed official responsible for banking supervision, in 2023. Mr. Barr has resigned from his role as a regulator, but remains a Fed board member.
If President Trump takes such action, it would end the administration’s tacit ceasefire with the Fed that has been in place since Warsh was nominated.
But if anyone was surprised by Warsh, it wasn’t the president. He said in January, before nominating Warsh, that he liked all the Fed candidates he was considering.
“The problem is, once they get a job, they change,” Trump said. “It’s disingenuous in a way, but they had to do what they thought was right.”
