Federal Reserve expected to raise benchmark interest rate for first time in three years, defying White House pressure
The Federal Reserve is widely expected to raise its benchmark interest rate by a quarter percentage point on Wednesday, which would be the first such increase in more than three years. The move would push the Fed's key rate to a range of approximately 3.75% to 4%. Fed Chair Kevin Warsh is set to hold a news conference following the decision to discuss the outcome and future policy direction.
Federal Reserve Chair Kevin Warsh, barely four months into the job, is expected to raise the central bank's benchmark interest rate Wednesday despite public opposition from President Trump, who has called for rates to be cut or left unchanged. Economists say Warsh largely committed himself to the move after a high-profile speech last month warning that inflation remained too far above the Fed's 2% target and might require higher borrowing costs to come down.
The anticipated quarter-point increase follows a July meeting at which the Fed left rates unchanged. After Warsh offered little explanation for that decision at a subsequent press conference, investors pushed up longer-term interest rates. The rate on the 10-year Treasury bond reached 5% this week for the first time in three years, with mortgage rates rising in tandem. Economists say a hike now is intended in part to prevent a repeat of that dynamic.
Inflation, as measured by the Fed's preferred gauge, stood at 3.7% in July — up from 2.3% in April 2025 before the Iran war drove gas prices higher, according to the Associated Press. Core inflation, which excludes food and energy, was 3.3% in July. NPR reported that the Fed has two meetings remaining before the end of the year, and that Wall Street investors currently anticipate three rate increases in total, with additional hikes possible in December and March.