Trump hits out after US Fed’s interest rate call

US President Donald Trump has lashed out after the Federal Reserve raised its benchmark interest rate for the first time since 2023, in an effort to quell stubbornly high inflation.

The quarter-point increase on Wednesday (Thursday morning AEST) lifts the Fed’s key rate to about 3.9 per cent and, over time, could result in higher borrowing costs for mortgages, car loans and credit cards in the US.

Trump, who has repeatedly called for rates to be lowered despite rising inflation, took to Truth Social after the announcement.

“Interest Rates in the United States should be 1 per cent, or less, because we are the Best Credit in the World — BY FAR. Our Country is BOOMING with new Investment!” he wrote.

“If we stopped Trading with every country that we have a Deficit with, which is most of them, we would make, at least, 1.5 Trillion Dollars a year.

“The word ‘Deficit’ is nothing more than a fancy word for LOSS. We are ‘carrying’ almost every country in the World, and that cannot go on any longer.

“LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!”

Read more

Teens were part of ‘planning and aftermath’ of mistaken-identity murder

Trump previously declared he would ban trade with deficit countries if the Fed did not cut interest rates.

Why the Fed pushed rates up

The decision was unanimously supported by the Fed’s policymakers.

“Economic activity is expanding at a solid pace,” the Fed said in its statement.

“While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient.

“Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”

All this meant that “inflation remains elevated”.

In a set of quarterly projections, the Fed signalled its rate-setting committee expects to hike rates a second time later this year to 4.1 per cent.

“Today’s policy action will support a timelier return” to the central bank’s 2 per cent inflation goal, the Fed said.

The move comes as Americans are already struggling with high costs for groceries, gas, and housing. 

Affordability has taken on a leading role in the upcoming midterm elections, just seven weeks away.

The rate hike is a surprising turnaround for Fed Chair Kevin Warsh, who was appointed by US President Donald Trump and took over the top job in May. 

Warsh often suggested last year when under consideration by Trump that the Fed could reduce its key rate, echoing the president’s call for lower borrowing costs.

Overnight, Warsh defended the decision to increase rates as he addressed reporters.

“The plain fact is that inflation is too high and has been for too long,” he said.

“We cannot affect any individual price, whether it be oil prices, whether it be foodstuffs at the grocery store, but what we can do and will do is ensure that any change in relative prices don’t broaden out,” he said.

Shortly after he commented on the increase, the Dow dropped 850 points.

Inflation in the US is driven by multiple factors, but chief among them are the war in Iran and surging spending on AI.

Job growth also increased in August, as did retail spending, according to the latest data.