The facts
The US Federal Reserve voted to raise interest rates on Wednesday for the first time since 2023, continuing its efforts to curb inflation. The Fed’s open market committee unanimously approved a quarter-percentage point increase, setting the benchmark interest rate to a range of 3.75% to 4%. This decision is the first rate hike since July 2023 and could place Fed chair Kevin Warsh at odds with Donald Trump, who had nominated Warsh with the expectation of lower rates. The committee stated, “Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal.” The move follows Trump's public statements advocating for the US to have the world's lowest interest rates. Inflation has been exacerbated by the ongoing US-Israel war with Iran, leading to increased energy prices, with gas prices averaging $1 more per gallon than the previous year and diesel fuel reaching an all-time high. Concerns over inflation have also triggered a sell-off in the US bond market, pushing the 10-year treasury note yield to a 19-year high.
Our take
Well, well, well. The Federal Reserve, that august body of economic eggheads, has finally mustered the collective balls to do something other than wring its hands. They voted unanimously to hike interest rates for the first time since the summer of 2023. A whole quarter of a percentage point. Let's not get too fucking carried away with the boldness. They've nudged the benchmark rate to a cozy little range of 3.75% to 4%. The official line, delivered with all the excitement of a dentist reading a toothpaste label, is that 'inflation remains elevated' and this thrilling action will help get us back to their precious 2% target. No shit, Sherlock. It's elevated because we're in a goddamn shooting war with Iran, which tends to make energy prices do a little dance. Gas is up a buck a gallon, diesel is at an all-time high, and the bond market is having a fire sale, pushing the 10-year treasury yield to a level not seen since the early 2000s. So the Fed is doing the one thing it's theoretically supposed to do: try to cool things down by making money more expensive to borrow.
But the real comedy here isn't in the dry economics. It's in the spectacular political dick punch this delivers. The Fed chair, Kevin Warsh, was nominated for the job by Donald Trump. Trump didn't pick this guy because he admired his nuanced views on monetary policy transmission mechanisms. He picked him with the very specific, loudly stated expectation that he'd deliver the 'world's lowest interest rates.' Trump wanted free money forever, a perpetual economic sugar high. Instead, Warsh and his committee colleagues just told him to go piss up a rope. They looked at the inflation numbers, looked at the war, looked at the bond market screaming in panic, and decided that doing their actual job was slightly more important than fulfilling the whims of the man who put one of them in the big chair. This is the definition of an awkward performance review.
Imagine the conversation. Trump is probably somewhere fuming, watching this on Fox News, seeing his own appointee basically call his economic fantasyland a bunch of childish bullshit. The Fed's statement is a masterclass in saying 'we are ignoring you' in the blandest possible bureaucratese. They didn't just hike rates; they hiked rates *unanimously*. Not a single dissenting vote for lower rates to throw the former president a bone. It's a clean, professional, institutional 'fuck you' wrapped in a press release. The bond market's 19-year high yield is just the financial markets giving a standing ovation to the sheer gall of it all. They're betting that the Fed might actually have a spine, even if it's a spine installed by a guy who wanted a rubber chicken. So here we are. Inflation is being fought with slightly more expensive money, a war is jacking up prices, and the Fed chair is now officially in a staring contest with the guy who gave him the job. This should be fun.
