Fed Raises Interest Rates Despite Trump’s Calls For Cuts

The Federal Reserve is raising interest rates for the first time in three years as high fuel prices cause elevated inflation.The central bank’s Open Market Committee voted 12 to zero on Wednesday to raise the target range for the federal funds rate by a quarter percentage point to a range of 3.75 to 4 percent.“While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient,” the committee said in a statement.Federal Reserve Chairman Kevin Warsh says the economy appears to be strengthening. “Consider the geo-political landscape of shocks and uncertainty and you begin to appreciate the resilience of the US economy,” Mr. Warsh said at a news conference. “Given that resilience, and even greater performance, an attitude of optimism is exactly what I heard,” Mr. Warsh said of the two days of meetings the committee held this week.President Trump has repeatedly called for lower rates but members of the committee said the inflation rate has been running too hot for five years and the rate increase is needed to speed up a return to the committee’s goal of a 2 percent inflation rate. Mr. Trump did not immediately react to the rate increase.Mr. Warsh wouldn’t directly answer a question on Mr. Trump’s desire for lower rates. “I’ve got nothing for you on a discussion with the president,” Mr. Warsh said. When another reporter asked a question about Mr. Trump’s trade policy and interest rates, Mr. Warsh, again, declined to answer saying, “Part of the independence of the Federal Reserve is we stay in our lane.”Mr. Warsh has constantly declined to give forward guidance on future rate decisions and remained consistent with that policy Wednesday when answering reporter questions.“The decision we made today was a sober decision, serious decision, responsible decision, one that we have been preparing for and thinking about,” Mr. Warsh said.A rise in the Fed’s benchmark interest rate traditionally leads to higher consumer loan rates, affecting everything from car loans to credit cards. Mortgage rates have already been on the rise and 30-year loan rates have climbed to nearly 7 percent.The National Association of Realtors chief economist, Lawrence Yun, reacted to the interest rate hike stating that consumers should expect 7 percent mortgage rates as the new normal. “The whopping, still-growing federal deficit does not help, as more government borrowing means less capital available for the private sector, including for mortgages,” Mr. Yun said in a statement.CME Group’s FedWatch tool, which measures the likelihood that the Fed will change the target rate, on Wednesday increased the likelihood of another quarter point rate increase at the next policy meeting in October to 46.5 percent from 43.5 percent a day ago and 17.6 percent a week ago.American stock markets dropped after the rate hike. The Dow Jones Industrial Average closed Wednesday down about 600 points, well off of lows reached as Mr. Warsh gave his press conference.

Fed Raises Interest Rates Despite Trump’s Calls For Cuts

Fed Raises Interest Rates Despite Trump’s Calls For Cuts

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