The Federal Reserve raised interest rates today for the first time in three years. The vote was unanimous. The man running that vote is Kevin Warsh — the same guy Trump nominated because he wanted someone who’d cut rates, not raise them.
Back in February, at a Semafor economic summit, Trump said he wouldn’t have picked Warsh if he’d known Warsh would go and hike rates. That’s about as close as a president gets to admitting he picked the wrong guy. Seven months later, Warsh and the rest of the Federal Open Market Committee voted to push the federal funds rate up a quarter point, to a range of 3.75% to 4%. Every single member signed off.
The reasoning has nothing to do with what the White House wants. Inflation is still running at 3.4% annually as of August, above the Fed’s target. Diesel just cracked $6 a gallon for the first time ever, and diesel isn’t optional — it’s what hauls everything from a warehouse to a store shelf. When trucking gets more expensive, your grocery bill finds out a few months later. The Fed’s whole job is keeping prices steady. Prices aren’t steady right now, so the Fed did what an unsteady economy called for.
For regular people this is simple and not fun. Mortgages and car loans get pricier to carry, and so does whatever you’re floating on a credit card. Some of that was already priced in — the 10-year Treasury topped 5% this week — so if you’re house-hunting right now, you felt this coming before the Fed made it official this afternoon.
What actually caught my attention isn’t the rate. It’s the vote count.
Warsh had every reason to slow-walk this. He could’ve hedged the statement or handed Trump something to spin as a partial win. Instead he looked at the inflation numbers and record diesel prices, and raised rates with a unanimous committee behind him.
I’m not weighing in on whether rates should be higher or lower right now. Reasonable people who study this for a living disagree, and I’m not pretending to know better than they do. What I care about is that the guy running the Fed did his actual job instead of the job his boss wanted, out loud, with his name on a unanimous vote. That’s supposed to be the baseline. It shouldn’t be the headline.
Your car payment is about to remind you the Fed is real. At least it’s proof the Fed still works the way it’s supposed to.
Two cents: an institution doing its job instead of its boss’s bidding shouldn’t be news. The fact that it is says more about everything else in Washington than it does about interest rates.
Photo of the Marriner S. Eccles Federal Reserve Board Building by AgnosticPreachersKid via Openverse, licensed CC BY-SA 3.0.