Fed, Battling Persistent Inflation, Ups Rates 1St Time In 3 Years

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“This summer's inflation readings do not tell me that underlying trends have meaningfully improved,” Warsh said.“Too many categories are still posting increases above 3 percent on both a six and 12-month basis.”

Trump campaign for lower rates

President Donald Trump publicly pressured and name-called Warsh's predecessor Jerome Powell for months for not lowering interest rates.

The public attacks escalated into a federal probe of Powell and the Fed for costly renovations at the Fed's headquarters in Washington. The administration eventually dropped the investigation.

The White House did not immediately respond to a request for comment.

Warsh declined to answer questions from reporters about Trump's previous calls for lower interest rates.

“Part of the independence of the Federal Reserve is we stay in our lane,” Warsh said.

The interest hike comes less than a week after the government's latest consumer price index revealed the cost of food, energy, housing and other goods and services rose 0.4% from July to August. The cost of all items over the past year has risen 3.4%.

Rep. Jason Smith, the Republican chair of the tax-writing House Ways and Means Committee, criticized the decision, saying in a statement that“interest rates should be coming down, not going up.”

The Missouri Republican praised the Trump-led“big beautiful bill” tax law passed last summer for delivering“larger paychecks” to Americans, and he blamed former President Joe Biden for past higher inflation.

“After years of elevated borrowing costs, a rate increase is the opposite of the relief families and small businesses need. As President Trump works to restore stability in the Middle East and bring down energy prices, the Fed should recognize the progress,” Smith said in a written statement Wednesday afternoon.

Soaring gas prices

Spiking energy prices caused by the war in Iran were the main driver behind higher costs. Gasoline alone rose 3.9% over the month of August.

As of Wednesday, Americans were paying an average of nearly $4.37 a gallon at the pump, according to AAA. Diesel prices reached a record high of $6.31.

The price of a barrel of oil surged above $100 in recent days, including Wednesday afternoon, when it reached $105, as fighting flared in the Middle East.

The United States and Iran continue launching rockets in the Strait of Hormuz, where one-fifth of the world's petroleum traveled prior to the war. US Central Command claimed Sept. 8 that it“destroyed” five Iranian crude oil carriers as part of its naval blockade aimed at damaging Iran's economy.