‘It’s a raise against Trump:’ Despite inflation being ahead of target for five years, Trump says the Fed’s latest hike is political

Federal Reserve Chairman Kevin Warsh told markets yesterday that the central bank’s rate-setting committee had unanimously agreed on a 25 basis point interest rate hike to combat inflation.

President Trump heard something different: He believes it’s a personal attack.

The U.S. base rate now sits at 3.75% to 4%, a quarter-percentage-point increase in the opposite direction of the downward trajectory Trump has been aggressively lobbying for.

Warsh, whose critics feared would be a “sock puppet” for the White House, backed the decision of the Federal Open Market Committee (FOMC), saying: “The plain fact is that inflation is too high and has been for too long.” The agreement to increase the base rate, combined with Warsh’s commitment to bringing inflation to the Fed’s 2% target, will go some way to reassure skeptics that the central bank remains—as is legally mandated—credibly independent.

But Trump is unhappy.

Still standing by his nominee, Trump directed his ire at the other voting members of the Federal Open Market Committee (FOMC).

He told reporters following the announcement: “[Warsh] has got a very tough board.

He’s got a board that was put there by a lot of other people, and the interest rates are too high.

They’re not appropriate.” “I talked to Kevin, and I said, ‘You might as well vote with the board because it’s not going to matter.’ The board is very hostile, they’re very political, they’re doing the wrong thing.

They are a bunch of politicians or people put on by politicians, and it’s a shame because it’s too high.” While the president’s support may be preferable to his contempt (as Warsh’s predecessor and fellow Trump-nominee, Jerome Powell, learned the hard way), Trump’s comments do little to help the central bank chairman trying to assure markets he is acting in the best interests of the economy and the public, rather than Capitol Hill.

Trump suggested the economy can “barrel through” the higher rates because it is “doing so well,” but implied he was the target of the committee’s action: “The problem they have is that we have the greatest economy in history … so they’re raising that only for political reasons, and that’s a raise against Trump.” Now, in the run-up to the midterms, American voters are facing inflation at 3.4%—driven, in part, by supply-side shocks to oil markets prompted by the U.S.-Iranian conflict in the Middle East.

The issue is front of mind for voters, with a recent Pew Research study finding the economy was the top priority consumers were thinking about (29%), followed by affordability specifically (15%).