Donald Trump spent two years harassing Jerome Powell into cutting interest rates, got his handpicked replacement installed at the Federal Reserve, and is now watching that replacement preside over a central bank where nearly half the voting members want to raise rates. You genuinely could not write this. On Wednesday, new Fed Chair Kevin Warsh held rates steady for the fourth time this year while quietly burying the language that signaled cuts were coming, and the Fed's own projections now show inflation hitting 3.6% by year's end.
What Actually Happened Wednesday
The Federal Open Market Committee voted unanimously to keep the benchmark federal funds rate in its current range of 3.5% to 3.75%, where it has sat since December. That part was not a surprise. Economists had widely expected it, and the vote itself was clean.
What was not so clean was everything else. As CBS News reports, the Fed's Summary of Economic Projections released Wednesday shows that nearly half of FOMC members are now penciling in a rate hike before the end of 2026. Not a cut. A hike. The same kind of hike Trump spent years screaming at Powell for even contemplating.
Warsh also stripped out the so-called easing bias from the policy statement, a line that had functioned as a quiet signal to markets that the Fed's next move, when it came, would be downward. Gone. "It's a bit shorter, a bit simpler and it dispenses with some older language," Warsh said at his post-meeting press conference, per CBS News. "That statement just gives you the facts as best we can judge it." The facts, as best they can judge them, are not great.
The Inflation Problem No One in the White House Wants to Talk About
Here is the number that matters most: inflation is at 4.2%, the highest the United States has seen since 2023, and more than double the Fed's 2% target. The Guardian reports that a sharp spike in energy prices driven by the war in the Middle East is the primary culprit, though a US-Iran ceasefire deal has since sent oil prices to a three-month low. That sounds like good news until you read the next sentence, which is that it will likely take months for energy prices to return to prewar levels.
Meanwhile, hourly earnings dropped to a seasonally adjusted 0.7%, according to The Guardian, which means price increases have been outrunning wage gains for the better part of a year. People are earning less in real terms. Prices are higher. The ceasefire may eventually help. "Eventually" does not pay rent in July.
The Fed's new projections, per CBS News, are a significant revision upward from what the FOMC was projecting just three months ago. Back in March, the central bank forecast the personal consumption expenditures index would close 2026 at 2.7%. The new number is 3.6%. Core inflation, stripping out food and energy, could hit 3.3% by year's end. Oxford Economics put it bluntly in a Wednesday report cited by CBS News: "The median official now expects headline and core inflation well above 3% by the end of this year."
Warsh: Trump's Guy, Sort Of
Kevin Warsh did not arrive at the Fed as some neutral technocrat. Trump nominated him in January, and before that nomination, The Guardian notes, Warsh had publicly argued for the importance of rate cuts, aligning himself with the president at a moment when the White House and the Fed were in open conflict. That is how you get the job.
Trump's relationship with Warsh is, at least publicly, warmer than the years-long cold war he waged with Jerome Powell. Last week, on NBC News's Meet the Press, Trump said he doesn't "want to have a big influence" on Warsh while simultaneously reiterating his desire for a rate cut. "Kevin is fantastic, and I want him to do whatever he wants," Trump said, which is a very specific kind of pressure dressed up as permission.
Warsh, for his part, is not cutting rates. He is removing the language that suggested cuts were coming and presiding over a committee where half the members are eyeing hikes. Whether this is independence or just a different flavor of caution is a question the next few months of inflation data will answer. Goldman Sachs Asset Management's Kay Haigh told CBS News that the hawkish shift at the Fed "was not just about higher energy prices" and that while the base case is still avoiding hikes, "the path is narrow."
What Powell Left Behind
The contrast with Jerome Powell is worth sitting with for a moment. Powell spent the final stretch of his tenure being investigated by the Justice Department over Fed headquarters renovations that went over budget, a probe The Guardian reports was dropped after political pressure. Powell called it a "pretext" designed to pressure the central bank to lower rates.
Earlier this month, accepting the John F. Kennedy Profile in Courage award, Powell warned about exactly the situation that now exists. "The public would lose faith that the central bank will make decisions based only on what's best for all Americans," Powell said, per The Guardian. "The Fed's credibility would be lost."
Powell said that. Then he left. And now we have a Trump appointee running the Fed during a resurgence of inflation that the Trump administration's own trade and foreign policy decisions helped create. The irony is not subtle.
What Comes Next
The core labor market is holding. The unemployment rate sits at 4.3%, per The Guardian, and job gains have kept pace with workforce growth. That stability is part of why the FOMC voted unanimously to hold rather than split on whether to hike immediately. The economy is not collapsing. It is grinding in a direction that makes every policy option uncomfortable.
Hank Smith, head of investment strategy at Haverford Trust, told CBS News before the meeting that this is "not the environment for a rate cut or a rate hike" and that the right move is "steady as she goes." That is probably the most honest description of what the Fed can actually do right now. But the easing bias is gone, nearly half the committee wants hikes, and the inflation forecast just got revised upward by nearly a full percentage point. "Steady as she goes" assumes the ship is not taking on water.
The Dingo Take
Let's just be honest about what happened here. Trump spent years in a public feud with Jerome Powell because Powell would not cut rates fast enough. Trump called Powell names, sicced the Justice Department on him over a building renovation, and eventually installed his own guy. His own guy's first major act was to remove the signal that rate cuts were coming, while presiding over a committee where nearly half the members want to raise rates. If you had written this as satire in 2023, people would have told you it was too on the nose.
The deeper problem is that the inflation now threatening to push rates higher is not some random economic weather event. Energy price spikes from Middle East conflict, trade policy uncertainty, supply chain disruptions that never fully resolved: these are not acts of God. They are the downstream consequences of years of decisions made by people who are still making decisions. And the institution that is supposed to be the independent circuit breaker for exactly this situation is now run by someone who got the job by publicly agreeing with the president.
Warsh may turn out to be fine. He may surprise everyone and run a genuinely independent Fed. Wednesday's press conference was, by most accounts, competent and measured. But the easing bias did not remove itself. The inflation projections did not revise themselves upward. And Jerome Powell did not win a Profile in Courage award for nothing. The Fed's credibility is the only thing standing between Americans and a much worse economic situation, and right now that credibility is being asked to do a lot of very heavy lifting with a smaller tool kit than it had six months ago.
