Chairman Kevin Warsh’s quarter-point rate increase sends an unambiguous message to President Donald Trump: Hands off the Federal Reserve.
Warsh on Wednesday voted with a unanimous Federal Open Market Committee to raise interest rates by a quarter-point, despite repeated urgings by Trump and his administration to cut or at least not hike. Those warnings continued even as the FOMC convened Wednesday. Yet Warsh reviewed the economy and made up his own mind that interest rates needed to rise, despite the potential political consequences.
Warsh made no reference to politics in his press conference but said he was worried about inflation that remained stuck above the Fed’s 2% target.Â
Warsh chuckled when asked by a reporter if he had a message for Trump and politely declined to answer. “I’ve got nothing for you on a discussion with the president.”
White House spokesman Kush Desai said on Fox News after Warsh’s press conference that he hadn’t spoken to Trump, but said the president’s desire for cuts was clear.
“Certainly today’s rather unfortunate decision by the Federal Reserve to hike interest rates was not, from the administration’s point of view, backed by a particularly compelling economic case,” Desai said.
Trump later seemed to address the Fed’s decision in a Truth Social post that didn’t mention Warsh by name. “Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR,” Trump wrote.
Trump selected Warsh to run the Fed in January after souring on former Chair Jerome Powell, whom Trump appointed in his first term. Trump was furious at Powell for, among other things, voting to cut interest rates by a half-point in September 2024. Trump thought that decision was an attempt throw the election to the incumbent Democratic administration in the November presidential election. Powell then, like Warsh now, said he looked only at the economy in making his decisions.
Trump has said he trusts Warsh to make good decisions. People close to the president have said Warsh could make the same decisions as Powell and get a different response. Before Wednesday’s rate decision, Trump wrote off Warsh’s decisions to hold interest rates steady — rather than cut — at FOMC meetings in June and July as the result of other Fed voters making political decisions.
That position will be difficult to maintain now that Warsh has voted with the FOMC to raise interest rates.Â
Trump administration members have argued the Fed ought not to intervene on the economy now, saying there is a tradition of the Fed not intervening ahead of midterm elections. That idea isn’t well-supported by the historical record.
Since 1994, when the Fed began making same-day announcements of changes in its interest rate policies, the Fed has changed interest rates with as much or less time on the calendar in advance of an election as there is now in five election years: 1998, 2004, 2008, 2018, and 2022.
Some Democrats have bitterly complained since Warsh’s nomination that he won’t be independent of the president who chose him. Wednesday’s rate decision suggests they may have been too early to judge him.
Trump and Warsh have a longstanding relationship, and the two men have spoken directly since Warsh took office, the president has said. Warsh also meets often with Treasury Secretary Scott Bessent, and the two men are friends.Â
If Trump doesn’t like what Warsh is doing, there is much he can do beyond merely telling Warsh through one of those channels.Â
Trump in 2025 attempted to fire Fed Governor Lisa Cook. The Supreme Court blocked that action, saying Trump hadn’t followed the appropriate process. “At minimum, Cook was entitled to some explanation of the evidence at issue, some avenue for a response, and a deadline by which a response would be due,” the Supreme Court wrote.
Last month, Trump restarted the process of firing Cook. The administration sent the Fed governor a letter saying Trump was considering firing her and demanded a response by Aug. 26. She sent that response, and now the ball is in the administration’s court.
Trump could fire Cook again at any time. That decision would likely need to be reviewed by the courts.
Trump’s Department of Justice also opened and then closed an investigation into Powell pending a separate inquiry by the Fed’s inspector general into cost overruns in building renovations. The DOJ has said it reserves the right to reopen that investigation once the IG issues its report, which could come at any time.
A consultant is looking on behalf of the Fed into the 2023 failure of Silicon Valley Bank, an institution overseen by the Fed. Some analysts believe the investigation could give the administration a pretext to fire Michael Barr, the Fed official who was in charge of bank supervision in 2023. Barr stepped down from that regulatory job but still has a seat on the Fed’s board.
If Trump takes any of those actions, it will end the administration’s tacit truce on the Fed that has held since he picked Warsh.Â
But if there’s anyone who’s surprised by Warsh, it shouldn’t be the president. He liked all the candidates he was considering for the Fed, he said back in January, before picking Warsh.Â
“Problem is they change once they get the job,” Trump said. “Sort of disloyalty, but they got to do what they think is right.”
