Fed Hikes Rates for First Time in 3 Years, Trump Says They're Doing It to Spite Him

The Minutes Are In, and Nobody Is Happy

Minutes released Wednesday from the Fed's Sept. 15-16 meeting, as covered by the New York Post, show that most officials expect another rate increase will be needed this year. The committee agreed unanimously that inflation is still elevated and has made little progress toward the 2% target in recent months.

The September move was a quarter-point hike to about 3.9%. It was the first increase in three years. For anyone keeping score at home, that means the central bank spent the better part of a presidency's worth of time cutting or holding, and has now decided the patient needs a different medicine.

Several policymakers went further than a single hike. They said the current rate is either too low to restrain the economy or acts as only a mild brake. Translate that from Fed-speak and you get: some of these people would be fine with doing this more than once.

Trump's Theory of the Case

The president wanted cuts. He got a hike. His response was to call the committee "very political" and offer this analysis: "They're raising rates to make Trump do as bad as they can possibly do."

Read that again. The proposed explanation for a unanimous finding that inflation is too high is a conspiracy to embarrass one man. Not the 3.4% annual price increase. Not the oil costs. Not the tariffs. A plot against Trump.

To his credit, he did not single out Chairman Kevin Warsh, the guy he appointed earlier this year. Which is awkward, because Warsh is the one who said, out loud, at a news conference, "The plain fact is that inflation is too high and has been for too long." That is not a man auditioning for a rate-cut parade.

What Is Actually Driving Prices

The Fed's own officials point to a few culprits. Higher oil and gas prices from the Iran war are one. The lingering effects of tariffs are another. Even if you strip those out, many officials think underlying inflation is stuck between 2.5% and 3%, still above target.

Then there's the data center gold rush. Prices for semiconductors, computer equipment and electrical components have spiked because of the rapid surge in data center construction, and the minutes say that has played a big role in accelerating inflation. Tech firms are also borrowing heavily to finance all that building, which is part of why longer-term rates have jumped.

Here's the part that should sting. A war and a tariff regime are policy choices. They are not weather. The Fed is now cleaning up after decisions made somewhere other than the Fed.

The Numbers Your Grocery Bill Already Knew

The Fed's preferred inflation measure came in lower than many economists expected in August, but it still showed overall prices up 3.4% from a year earlier and core prices up 3%. Month to month, prices rose 0.3% from July to August, with core up just 0.2%.

So the trend is not a runaway fire. It is also not the 2% the Fed says it wants, and Americans are already getting squeezed on groceries, gas and housing. Mortgage and other long-term borrowing rates have climbed over the past few months too, though the Fed's own hike has likely played only a limited role in that.

That is a cruel little detail. Borrowing costs are rising for reasons mostly outside the Fed's rate decision, and the Fed is raising rates on top of it.

Wall Street Is Betting on Patience, Then December

Not everyone at the Fed is itching to hike again immediately. Vice Chair Philip Jefferson said last week that policymakers "will need to come to our own judgement, which may take more time." Other key officials have said the Fed can wait and watch how the September hike plays out.

Investors have read the tea leaves. Futures pricing now points to the Fed holding steady at its Oct. 28-29 meeting and raising again in December.

That timeline is almost comically awkward. The Fed holds off until after the election, then raises rates once the votes are counted. The committee will insist that is a coincidence, and the president will insist it is a plot, and both of them will be arguing about a calendar that voters are going to experience as a grocery receipt.

The Midterms Are Seven Weeks Away

Affordability is now a leading issue in the midterm elections, which are seven weeks out. Rising prices, rising rates and a president blaming the referees is not a message anyone should enjoy running on.

Many officials noted that financial conditions, including rising stock prices, look supportive of economic growth. In plain English, the people with portfolios are doing fine, which is exactly why the Fed thinks it may need to tighten more to cool things off. The people feeling the squeeze are not the ones whose stocks are up.