Fed Raises Interest Rate to 3.75-4% Amid Trump's Political Criticism

The US Federal Reserve raised its benchmark interest rate by 0.25 percentage points to an annual range of 3.75%-4.00%. President Donald Trump criticized the decision as politically motivated rather than a response to inflation, claiming it was targeted at him. The Fed's Federal Open Market Committee (FOMC) unanimously voted 12-0 to increase the federal funds rate target range from 3.50%-3.75% to 3.75%-4.00%. In its statement, the Fed noted that inflation remains elevated and described the move as part of efforts to return the annual inflation rate to its long-term goal of 2%. This marks the first increase since 2023 and is also the first adjustment under newly appointed Fed Chair Kevin Warsh.

Trump, who nominated Warsh, criticized the Fed's decision as 'very hostile and political' immediately after the announcement. He claimed that raising rates was solely for political reasons targeting him, given he had what he called 'the greatest economy in history.' Warsh emphasized the need to address inflation, stating that recent price indicators did not show meaningful improvement from underlying trends.

The Fed's September economic projections showed a median forecast of 4.1% for the federal funds rate by year-end, higher than the current range but not indicating specific future increases. Markets had already partially priced in the rate hike, with limited immediate reaction: major US indices fell modestly after the announcement (Dow Jones down 1.21%, S&P 500 down 0.44%, Nasdaq down 0.01%). The cryptocurrency market also showed minimal volatility, with Bitcoin trading at $76,491.70 up 0.6% as of 3:35 PM KST on September 17.

Analysts noted that while rate hikes typically increase discount rates and funding costs for risk assets, the market had already anticipated this move, making subsequent policy statements and future inflation data more influential than the announcement itself. The Fed's focus remains on price stability and labor market conditions as it determines monetary policy direction, with no immediate commitment to further increases beyond current projections.