The Federal Reserve raised its benchmark interest rate by a quarter point on Sept. 16, launching the fourth tightening cycle of the 21st century in a unanimous vote that puts Chair Kevin Warsh squarely at odds with the White House. The move, lifting the federal funds target range to 3.75%–4.00%, caps a record-shattering year for U.S. equities—the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite have all climbed to multiple fresh highs—and draws an early line under the central bank’s priority: price stability, regardless of political pressure.
The Federal Open Market Committee voted 12–0 on Sept. 16 to raise the federal funds target rate by 25 basis points to 3.75%–4.00%, the first increase since 2023 and the start of only the fourth rate-hiking cycle of the 21st century.
Warsh framed the action in his post-meeting statement as having “removed a dose of accommodation.” The language carried a clear signal that this is unlikely to be a one-and-done move: just as a single dose of medicine can only temporarily soothe a headache, several are needed to break a fever. Describing inflation as “too high for too long,” Warsh’s formulation implied further withdrawal of policy accommodation will be required to deliver price stability.
Officials noted that economic activity was expanding at a solid pace and that the unemployment rate remained low. They said the rate increase, along with subsequent moves, “would support a timelier return of inflation to the Committee’s 2 percent goal.”
Since the start of his second non-consecutive term in January 2025, President Donald Trump has repeatedly criticized then-Fed Chair Jerome Powell and the FOMC for not cutting interest rates fast enough. Even after the committee delivered six rate cuts between September 2024 and December 2025, Trump has argued rates should be at or below 1%.
The president’s case is straightforward: cheaper borrowing costs would turbocharge hiring and spending tied to Wall Street’s leading catalyst, the artificial intelligence infrastructure build-out. Lower yields would also ease the burden of a national debt that surpassed $40 trillion in August—persistent federal deficits look far less damaging when Treasury yields are declining.
Following the September meeting, ABC News reporter Elizabeth Schulze pressed Warsh on what his message would be for a president who has repeatedly called for cuts. The Fed chair was blunt: “I’ve got nothing for you on the discussion with the president. The decision we made today was the right decision to deliver on the remit that Congress gave us to ensure stable prices.”
Those nine words—”The decision we made today was the right decision”—left little room for interpretation and were read by markets as an indirect rebuke of Trump’s sustained rate criticism. The president, for his part, has publicly prodded Warsh to “vote with the board” on the hike, saying the move “is not going to matter.” Trump has said he retains confidence in Warsh while aiming his fire at the rest of the FOMC.
Minutes from the September meeting, released Wednesday, confirmed the path many investors had already priced in. “Most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the record showed. Officials hedged, however, saying they approach each meeting with an open mind and that future decisions will be guided by incoming data.
Market pricing has shifted markedly since the meeting. Immediately after the September hike, investors assigned a 51% probability of another increase at the Oct. 28 gathering. But after August’s personal consumption expenditures index—the Fed’s preferred inflation gauge—came in cooler than expected, and September’s jobs report showed almost no labor-market growth, the CME FedWatch tool now puts the odds of an October hike at just 18%. Traders have instead piled into a December move, pricing around an 80% chance that rates land at 4.00%–4.25% or higher after that meeting.
Looking ahead, October’s CPI report—due before the next FOMC gathering—will be the last major inflation read before policymakers convene. The war in Iran remains a key swing factor, having driven the recent spike in energy prices. Investors currently expect the Fed to keep lifting rates into 2027, but a weakening labor market, softening consumer spending—Walmart on Friday posted its worst comparable-sales growth in six years in the second quarter—or a drop in oil prices if the Strait of Hormuz fully reopens could all pull the inflation path off the committee’s intended trajectory.
