The invitation by the E.U. for Canada to become an “associate member” is a sign of Mr. Trump’s brand of diplomacy, which often involves threatening America’s closest friends.
The Trump administration plans to deliver 60,000 of the powerful munitions at a time when opposition is growing in Washington to arms sales to Israel.
WASHINGTON: The Federal Reserve raised interest rates on Wednesday and flagged more hikes in the coming months, with new U.S. central bank chief Kevin Warsh joining a unanimous decision that effectively acknowledges the Trump administration’s inability so far to control inflation that policymakers worry could worsen.
While President Donald Trump had promised to lower prices on his watch, the combined impact of his global import tariffs, an energy shock following the start of the U.S.-Israeli war with Iran, and capital spending from the artificial intelligence boom has kept price pressures intense enough that the Fed felt it needed to raise its benchmark overnight interest rate by a quarter of a percentage point to the 3.75%-4.00% range.
Updated quarterly economic projections showed 16 of 18 policymakers anticipate at least one more quarter-percentage-point hike by the end of this year, with only two of them seeing rates remaining stable from here. All but one indicated they saw upside risks to inflation that they no longer described as largely arising from one-off supply shocks.
Warsh, who again did not submit rate or other economic projections, attributed the need for tighter monetary policy in part to an economy he sees as picking up speed, with strong economic and job growth adding to price pressures that no longer seem rooted in oil costs or import tariffs alone.
“There’s been a pretty wide-ranging set of data, including the labor markets, that the economy has strengthened,” Warsh told reporters in listing the reasons that prompted him to support a rate hike after advocating that rates should remain on hold at the Fed’s July 28-29 meeting. “Domestic spending has been resilient, productivity growth strong, and capital investment is robust.”
The rate increase was the first such move in three years and the first policy shift under the new Fed chief, who took office in late May after being selected by Trump with an expectation that he would cut rates.
“Inflation remains elevated. Today’s policy action will support a timelier return to the committee’s 2% goal,” the central bank’s Federal Open Market Committee said in its policy statement after the end of a two-day meeting.
Also Read: Fed holds rates steady; three policymakers dissent in favor of a hike
Warsh, speaking in his post-meeting press conference, called the rate hike the “right decision.”
“I would be hard-pressed to describe broad financial conditions as restrictive,” he said. “This view was widely shared by the committee, so we removed a dose of accommodation.”
Trump responds
Trump reacted quickly, repeating what has been a standing call since returning to office in January 2025 that interest rates in the U.S. should be slashed to perhaps 1%, a level usually associated with Fed efforts to boost the economy out of a crisis and something that would likely be inflationary in normal times.
“Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR. Our Country is BOOMING with new Investment! If we stopped Trading with every country that we have a Deficit with, which is most of them, we would make, at least, 1.5 Trillion Dollars a year. The word ‘Deficit’ is nothing more than a fancy word for LOSS … LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND
FAST!“ Trump said on his Truth Social platform in comments that, while not mentioning Warsh by name, were reminiscent of the sorts of barbs the president launched routinely at former Fed Chair Jerome Powell.
The president’s reaction highlighted the significance of the Fed’s move under Warsh on Wednesday. In a truncated press conference, roughly 15 minutes shorter than what was typical under his predecessors, Warsh focused on the emerging evidence that convinced him inflation would not improve at an adequate pace without tighter monetary policy — a direct counter to administration officials’ comments that inflation was no longer a problem or would fall on its own over time.
The dollar strengthened broadly and yields on 2-year U.S. Treasury notes — highly influenced by Fed policy rate expectations — shot to the highest in more than two years after the release of the Fed’s policy statement and projections.
Yields on longer-dated bonds, meanwhile, held steady, flattening the yield curve in an initial vote of confidence that Warsh —
who calls inflation a “choice” of the central bank — was at last acting on his running pledge to deliver price stability.
“The Fed has finally begun its hiking cycle, and the debate now shifts from whether rates will rise again to how many hikes lie ahead,” said Seema Shah, chief global strategist at Principal Asset Management in London. “The unanimous vote shows that rising energy prices and stubborn inflation have brought even the doves on board, making a one-and-done move highly unlikely.”
Indeed, rate futures markets reflect about a 90% probability of a follow-up quarter-percentage-point Fed rate hike by the end of this year, according to CME Group’s FedWatch Tool.
The Fed’s policy statement and projections show the policy rate rising to the 4.00%-4.25% range by the end of this year and ending 2027 at the same level.
Notably, the policy statement dropped a previous reference attributing current elevated inflation to “supply shocks,” particularly in the energy sector, a nod to concerns among policymakers, including Warsh, that price pressures were too broad for comfort.
The rate increase was announced less than two months ahead of midterm elections that will determine whether Trump’s Republicans maintain control of Congress for the final two years of his presidency.
The Republicans are facing an uphill battle with voters angry about gasoline prices that are about a third higher than a year ago and interest rates on home mortgages that have been rising steadily this year. The average rate on a 30-year fixed-rate mortgage is approaching 7%.
Fed policymakers marked up their estimates of inflation, as measured by the Personal Consumption Expenditures Price Index, to 3.7% versus the 3.6% projected at the meeting in June. Inflation is not projected to return to the 2% target until 2029, a year later than previously expected.
Economic growth was marked up slightly from 2.2% to 2.3%, while the unemployment rate is seen ending the year at 4.1%, versus the 4.3% projected in June.
The bipartisan measure targets financing for Russia’s war against Ukraine as attacks intensify. It passed the House over the objections of Democrats who opposed handing President Trump new tariff powers.
Not every winner in the AI race makes chips. Some sell cowboy boots.
Boot Barn a U.S. retailer best known for western wear, said on Tuesday that a growing share of its bulk workwear orders were now tied to data-center construction.
The brand has long sold boots in bulk to oil and gas and construction firms looking to outfit their entire teams. Now, “more and more often, those are data centers,” CEO John Hazen said at the Goldman Sachs Global Consumer and Retail Conference in New York.
The company now finds itself tracking the progress of nearby data center projects to determine what kinds of boots to stock in local stores, underscoring how the AI spending surge is rippling far beyond Silicon Valley and reshaping fortunes across the broader economy.
Boot Barn, which sells western-style and work boots across its nearly 600 stores, has seen comparable sales growth in its work boots business for the past five consecutive quarters. The company did not immediately respond to a request for comment on revenue growth figures tied to data centers.
Employment in the U.S. construction sector has ticked up this year, driven by demand for labor to build data centers. Construction added 22,000 jobs in August, the Labor Department reported.
The growing appetite for workwear shows the sheer scale of the data-center buildout underway in the U.S., even as some AI executives have recently urged caution about the pace of the technology’s development and communities increasingly push back against the energy and water demands of new facilities.
“When they’re clearing dirt, we need regular work boots. When they’re building the four walls, we are looking at steel-toe work boots,” Hazen said.
Workwear maker Brunt Workwear is seeing a similar pattern. The company told Reuters that some of its strongest demand is coming from California and Texas, two states attracting some of the largest AI infrastructure investments.
Brunt Workwear is “pushing hard” to meet demand from data-center construction, CEO Eric Girouard said.
The Israeli military said in a statement it “did not strike the building,” but did not say whether any strikes on nearby targets could have caused the damage.
The bloc’s offer of “associate member” status to Ottawa shows how U.S. allies are pulling closer together. But their plans face significant obstacles.
Dozens more are missing after shafts collapsed on Sunday, according to a charity, which said that the chances of rescuing those trapped were “limited.”
An expert team spent days trying to find six men who were trapped underground after catastrophic floods, as families clung to fading hopes.
The Iran-backed militia in Yemen said it had downed a Saudi jet, while the Saudi-led military coalition accused it of firing a drone near Mecca. The Houthis denied doing so.
