Fed policymakers show support for rate hikes
WASHINGTON — The Federal Reserve kept its key rate unchanged Wednesday yet almost half the central bank’s policymakers said they could support a rate hike later this year.
The unexpectedly aggressive tilt toward higher rates would disappoint President Trump and suggests heightened concerns about persistent inflation among Fed officials.
In an unusually short statement after their two-day meeting, the officials dropped language that had suggested their next move would be to cut the key rate. The brief statement reflects the influence of new chair Kevin Warsh, who was appointed by Trump. Warsh has previously criticized the Fed for commenting too broadly on the economy.
Still, Warsh’s 18 colleagues on the Fed’s rate-setting committee sent a clear message in a set of quarterly projections released Wednesday: Nine signaled they supported higher rates this year, with six of those supporting two or more quarter-point increases.
It’s a sharp change from March, when no policymakers penciled in a hike and the committee as a whole forecast one cut in 2026. The change is an acknowledgement that inflation is at its highest level in three years and many officials have said in recent speeches that if inflation doesn’t decline, higher rates may be necessary in the coming months.
Warsh, in his first news conference as chair, also underscored the Fed’s determination to bring inflation down to the central bank’s 2% target, suggesting he will take a hawkish approach as chair. “Hawks” typically support higher rates to quell inflation, while “doves” often support lower rates to boost hiring.
“We’ve missed (on inflation) for five years and we’re going to fix that,” he said. “When we deliver on our price stability objectives, which we will, the American people will feel as though the hardships that they’ve been living through … are in the rear view mirror.”
Warsh had supported rate cuts last year while under consideration to be Trump’s pick as Fed chair to replace Jerome Powell. Since returning to the White House last year, Trump repeatedly attacked Powell for not cutting rates more deeply.
Warsh did not hint whether he was leaning toward hiking rates, but economists saw his message at the press conference as hawkish.
“The risk that they might need to raise rates has clearly risen given what we got today,” Matthew Luzzetti, chief U.S. economist at Deutsche Bank, said.
Trump, for his part, appeared to accept the Fed’s decision.
“We have a very good guy over there now so I’m guided by what he wants to do,” Trump said in France, where he attended a meeting of leaders from the world’s seven largest economies.

