The Federal Reserve has raised US interest rates for the first time in more than three years, choosing the fight against inflation over President Donald Trump’s repeated demands for dramatically cheaper money. The decision also creates an extraordinary test for the independence of America’s central bank.
WASHINGTON — September 17, 2026
The Federal Open Market Committee voted unanimously on Wednesday to increase its benchmark federal funds target range by 0.25 percentage points, taking it to 3.75–4.00 per cent.
It was the first US interest-rate increase since July 2023.
The Fed said economic activity continued to expand at a solid pace, domestic spending remained resilient and inflation was still elevated. The central bank said the increase was intended to support a more timely return towards its 2 per cent inflation target.
Trump wanted exactly the opposite
President Donald Trump has spent months arguing that American interest rates should be substantially lower.
Following the decision, he repeated that demand.
“Interest Rates in the United States should be 1%, or less,” Trump wrote on Truth Social, arguing that America’s creditworthiness justified much lower borrowing costs.
Trump later said he still had confidence in Fed Chair Kevin Warsh, whom he appointed to replace Jerome Powell earlier this year.
But he criticised the wider Federal Reserve board, describing it as “very hostile” and “very political”.
Warsh chooses inflation over politics
That places Warsh in a particularly sensitive position.
He was Trump’s choice to lead the Federal Reserve and took office in June with a commitment to preserve the institution’s monetary-policy independence.
Now, only months into the job, he has supported a rate increase directly contrary to the president’s preferred policy.
Warsh described the increase as a “sober”, “serious” and “responsible” decision and said inflation had remained too high for too long.
The vote was 12–0.
That means Warsh was not acting alone. Every voting member of the FOMC supported the increase.
Borrowing becomes more expensive
The decision matters far beyond Washington.
Higher Fed rates can eventually feed through into borrowing costs for mortgages, credit cards, vehicle financing and corporate debt.
They can also strengthen the dollar and influence global capital flows.
For emerging markets, higher US rates are particularly important because attractive returns on dollar assets can pull investment away from developing economies and increase pressure on currencies and dollar-denominated debt.
Another increase could follow
Perhaps the most important message was that Wednesday’s decision may not be the end of the tightening cycle.
New Fed projections showed that 16 of 18 policymakers expect at least one additional quarter-point increase before the end of 2026.
That would move American monetary policy even further away from Trump’s demand for rates around 1 per cent.
The disagreement therefore reaches beyond a single interest-rate decision.
Trump wants cheaper money to reduce borrowing costs and support economic activity.
The Federal Reserve is looking at persistent inflation and concluding that monetary policy may need to become tighter instead.
That tension goes to the heart of why central banks are designed to operate independently from governments.
Presidents think about growth, borrowing costs, budgets and elections.
Central banks are supposed to think about inflation, employment and monetary stability.
This week, those priorities collided.
And for now, the Federal Reserve has chosen inflation over the president’s preferred interest-rate policy.
Newshub Editorial in North America – 17 September 2026
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