Fed Raises Rates as Trump Calls for 1% or Less

The Federal Reserve raised its benchmark interest rate by a quarter percentage point Wednesday, lifting the target range for the federal funds rate to 3.75% to 4%, while President Donald Trump called for rates of 1% or less.

The Federal Open Market Committee approved the increase by a 12-0 vote. The committee said inflation remains elevated and the action would support a timelier return to its 2% goal.

In a Truth Social post, Trump called for interest rates of 1% or less. He also said the United States has the world’s best credit and is experiencing increased investment.

Trump claimed that ending trade with every country with which the United States has a deficit would allow the country to make at least $1.5 trillion annually. He characterized a deficit as a loss and called for U.S. interest rates to be lowered quickly.

The supplied material provides no independent support for Trump’s claims about U.S. credit, investment or the amount the country could make by ending trade with certain countries.

The Fed said economic activity is expanding at a solid pace and domestic spending has remained resilient despite elevated uncertainty linked partly to geopolitical developments. It described productivity growth as strong and capital investment as robust.

Job gains have kept pace with growth in the workforce, while the unemployment rate has changed little, according to the committee.

The FOMC said it is continuing its policy of maintaining ample reserves in the banking system. It said the rate increase supports the Federal Reserve’s dual mandate and that the committee “will deliver price stability.”

To implement the decision, the Federal Reserve Board unanimously raised the interest rate paid on reserve balances to 3.90%, effective Sept. 17.

The board also unanimously approved a quarter-point increase in the primary credit rate to 4%, effective Sept. 17. It approved requests submitted by the Federal Reserve banks of Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City and Dallas.

The FOMC directed the Federal Reserve Bank of New York’s Open Market Desk to conduct operations needed to maintain the federal funds rate within the new target range.

The directive set the rate for standing overnight repurchase agreement operations at 4%. It set the offering rate for standing overnight reverse repurchase agreement operations at 3.75%, with a daily limit of $160 billion per counterparty.

When appropriate, the desk may purchase Treasury bills and, if needed, other Treasury securities with remaining maturities of three years or less to maintain ample reserves.

The desk will roll over all principal payments from the Federal Reserve’s Treasury holdings at auction. It will reinvest all principal payments from agency securities into Treasury bills.

The Federal Reserve said it would update the implementation details as appropriate to reflect future decisions about its operational tools and monetary policy approach.