Angry Trump attacks Fed rate hike
Donald Trump attacked the US Federal Reserve after the central bank raised interest rates for the first time in three years.
In a post on his social media platform Truth Social, Mr Trump called for interest rates to be lowered "fast" after the Federal Open Market Committee (FOMC) announced a 0.25 percentage point increase in interest rates to 3.75pc to 4pc, and signalled more increases to come.
Mr Trump said: "Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World, BY FAR.
"LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!"
It is the first time the Fed, led by Kevin Warsh , has raised interest rates since July 2023.
Mr Trump's comments noticeably failed to single out Mr Warsh for criticism.
Mr Warsh, who replaced Jerome Powell as chairman in May, was appointed by Mr Trump after the president previously waged war against Mr Powell .
Mr Trump called him a "numbskull" and threatened to sack him in a move that shocked central bankers around the world.
Earlier this week, Mr Trump also said the US "should be paying the lowest interest rate in the world".
Asked by reporters on Wednesday if he had a message for the president, Mr Warsh said: "I've got nothing for you on a discussion with the president."
Most FOMC officials now expect to raise interest rates at least once more by the end of 2026, with some anticipating two additional increases.
Stocks on Wall Street fell after the decision while US borrowing costs rose. The dollar also strengthened.
The decision will have significant implications for the Bank of England, whose Monetary Policy Committee (MPC) will meet on Thursday to make its own interest rate decision.
An increase could put further pressure on the Prime Minister who would have to confront higher borrowing costs affecting the UK economy.
Analysts have warned that if the MPC fails to follow other central banks such as the Fed and defies market expectations, it could trigger a fall in the value of the pound that would drive up inflation even further.
The Fed's decision comes after the European Central Bank raised interest rates last week in a move that Christine Lagarde, the president, said was a "no brainer" in response to the war in the Middle East.
Mr Warsh said he knew that the central banks' decision would "spill over to the rest of the world".
Referring to his recent meetings with central bankers, who included Andrew Bailey, the governor of the Bank,, Mr Warsh said: "What I heard around the table from most of the advanced economies, because they're suffering from price pressures too.
"They're making their own choices consistent with their remit. It tells me a couple things. One is when the Federal Reserve makes a policy choice, it matters not just to the US economy, but it spills over to the rest of the world."
US government borrowing costs rose after the decision, with yields on 10-year treasuries rising by 0.01 percentage points to surpass 5pc.
Rates had hit their highest level since 2007 earlier in the week after fresh escalations in the Middle East fuelled fears of an inflation crisis.
American stocks fell, as higher rates would make it harder for businesses to borrow. The benchmark S&P 500 dropped by 0.67pc while the Dow Jones Industrial Average slumped by 1.4pc. The dollar also rose to its highest level in a month against a basket of other currencies.
The FOMC raised its inflation forecast after a fresh surge in oil prices since its last meeting.
Committee members now expect that US inflation will average 3.7pc this year, up from 3.6pc in their June forecast.
The latest official figures show US prices are currently rising at a rate of 3.7pc, nearly twice the Fed's 2pc target.
They also cut their unemployment forecasts and raised their expectations for economic growth.
FOMC members said they anticipated US GDP will rise by 2.3pc this year, up from the 2.2pc growth they had forecast in June.
Olu Sonola, the head of US economics at Fitch Ratings, warned that US households will feel fresh pain from higher borrowing costs.
Mr Sonola said: "The economy's ability to withstand higher rates should not be confused with consumers' ability to absorb them.
"Aggregate resilience will mask a widening divide between consumers insulated from higher rates and those being squeezed by increasingly expensive credit."
The dollar rose against a basket of currencies after the Fed raised interest rates.
The dollar index, which measures the currency against major peers, was up 0.3pc at 99.961, the highest in nearly five weeks.
Sterling fell 0.5pc to $1.34155. British inflation accelerated to a five-month high in August, a day before the Bank of England is expected to leave rates steady.
Kevin Warsh has said the Fed is focused on inflation and that its independence relies on staying in "our lane".
Mr Warsh said: "Our predominant focus is on the price stability side of our mandate. The plain fact is that inflation is too high, and has been for too long"
He said the decision to lift interest rates wasn't influenced by financial markets.
"We made this decision today based on our assessment of the situation. I'll observe market prices and see what they have to say. But today was our decision."
"Part of the independence of the Federal Reserve is we stay in our lane. We let people that do trade policy and fiscal policy stay in their lane too. That's how we can stand up here and call them the way we see them."
Kevin Warsh faces backlash from Donald Trump over the decision to lift interest rates for the first time in three years, an analyst has warned.
Richard Carter, head of fixed interest research at Quilter Cheviot, said: "This is a pivotal moment for Kevin Warsh too. He was brought into the Fed as Trump's guy, poised to deliver the rate cuts he so desperately wants.
