The Federal Reserve raised interest rates for the first time since 2023 on Wednesday, pushing its benchmark target into a 3.75%-4.00% range in a unanimous vote. Chair Kevin Warsh told reporters the economy “has indeed strengthened,” but he added that “inflation is the problem.” The move puts him squarely at odds with President Donald Trump, who has repeatedly pushed for lower rates to boost growth.
Warsh declined to comment on Trump’s reaction to the decision, even when asked directly. He repeated the same line he used at his Jackson Hole keynote in August: “We will deliver price stability. We’re committed to a discipline, not a decision.”
What the Rate Hike Actually Does
When interest rates rise, the cost of borrowing goes up. This makes spending less attractive, which helps hold back the inflation that results from too much of it. However, the change also punishes assets that depend on cheap money, including stocks and Bitcoin. Government bonds, which offer a safer haven, start paying more, so investors take their money away from riskier wagers.
A rise was anticipated. Wall Street had factored in a 25-basis-point adjustment for weeks. Bitcoin jumped temporarily after the announcement but settled close to $75,500, off roughly half a percent for the session. The shift had already been accounted for by investors.
Warsh’s Careful Words on AI
Warsh addressed artificial intelligence during the press conference, but he drew a clear line around his own job. “I’ve spent a lot of time thinking about AI,” he said, before arguing that Fed independence means staying out of AI policymaking itself.
“The policy decisions on AI are made by other parts of the government,” he said. “Implications of those decisions have impact on our jobs, and that’s what we’ll focus on.” He added that the Fed cares “much about the implications on the demand side of the economy.”
The stance lines up with the five task forces Warsh established earlier this year, including the one examining how AI affects productivity and jobs.
The Road Ahead on Rates
A rate decision it had already seen coming will not be the final occasion Bitcoin and the rest of the market have to shrug off it. The Fed’s updated projections still point to one more hike before year-end. If Warsh follows through, Wednesday’s move is merely the latest instance in a pattern that shows no sign of ending.
The short-term effect remained slight, with Bitcoin traders taking in the news without much trouble, and the market showing little sign of disturbance.
A Central Bank That Won’t Answer to the President
Warsh’s refusal to answer questions about Trump’s reaction is notable. He is the president’s appointee, yet he declined to engage on what the president expects next.
This is the clearest signal yet that Warsh’s inflation talk was never just talk. He agrees with Trump on growth but hikes rates anyway, the opposite of what Trump has been demanding for months. Economic growth isn’t enough to justify a drop in interest rates, the board has evidently decided.
Warsh has chosen to remain in a bind, and he is committed to discipline, not a decision. Price stability is what he will deliver.
Bitcoin and the markets both anticipated the announcement, but Trump’s response has yet to be revealed.
Key Numbers
- Rate hike: 25 basis points
- New range: 3.75%-4.00%
- First increase since: 2023
- Vote: Unanimous, all members of the policy committee
- Bitcoin price: Settled close to $75,500
- Session drop: Roughly half a percent
- Expected hikes remaining: One more before year-end
The central bank’s benchmark rate was raised by 25 basis points to 3.75%-4.00%, the first increase since 2023, with all members of the policy committee voting unanimously for it. Bitcoin held steady near $75,500, dropping roughly half a percent over the course of the day. A single additional hike is expected before the year ends.
The Fed’s message is simple: inflation is the problem, and the economy’s strength doesn’t change that. Warsh is willing to let growth slow to fight it. Whether Trump accepts that answer is another question entirely.
Get the Notebook.
The day's best stories and every fresh verdict, in plain English, in your inbox by seven. One email a day, no more.