Trump says Fed Chair Warsh 'would love' to lower interest rates. He might push to raise them instead

The vote earlier in the day showed which way the pressure inside the Fed actually runs. The Federal Open Market Committee voted 9-3 to hold its benchmark rate at 3.50% to 3.75%, its fifth straight hold — and all three dissenters wanted a quarter-point increase. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan each voted to raise rates. No one voted for a cut.

Warsh didn’t seem bothered by the split.

“I asked for a good family fight, and I got one,” he told reporters afterward. “That’s the purpose. That’s the design feature.”

Traders think the fight may end with a hike. Futures markets put the odds of an increase at the Sept. 15 to 16 meeting above 60%, according to CME Group’s FedWatch tool. That would be the Fed’s first increase since July 2023, when it lifted the target range to 5.25% to 5.5% at the end of its last tightening cycle.

So if you’ve been waiting for a cheaper mortgage or a break on your card balance, Wednesday didn’t bring it any closer. The live question at the Fed heading into September is whether rates go up.

What Warsh said about raising rates

Warsh refuses to tell markets what he plans to do next. Since he took over in May, the statement the Fed puts out after each meeting no longer hints at where rates are headed — he cut that language. But he did explain how he weighs the decision.

A rate-setter who sees “underlying inflation moving higher” while the job market holds steady is “more inclined to tighten policy,” Warsh said at his press conference. “That’s my reaction function.”

He has said similar things since he arrived. In prepared testimony to Congress on July 14, Warsh said the committee has “no tolerance for persistently elevated inflation.” And when June’s inflation report came in better than expected, he warned against declaring “mission accomplished.”

“That is not my view,” he said.

You can see why he’s careful, though June’s report cut both ways. Consumer prices rose 3.5% in the 12 months through June, the Bureau of Labor Statistics reported, down from 4.2% in May. Most of that drop came from energy, which fell 5.7% in a single month after the U.S.-Iran ceasefire reopened the Strait of Hormuz. Energy is still up 15.7% over the year, and gasoline is up 26.7%.

But the measure the Fed leans on hardest also improved. Core inflation, which strips out food and energy to show the underlying trend, eased to 2.6% from 2.9% — within striking distance of the Fed’s 2% target. That’s the number the other side points to. Economists who spoke with CNBC after the report said price growth should keep cooling as long as the Middle East stays quiet, which would take a September increase off the table. Mark Zandi, chief economist at Moody’s, said the peak had likely passed — but warned that renewed war closing the strait again would send prices, and rates, back up.

How markets reacted

The bond market didn’t read the hold as reassuring. Long-term Treasury yields jumped after the press conference: the 30-year climbed to 5.21%, a level last seen in 2007, and the 10-year, the benchmark mortgage rates tend to follow, reached 4.67%. Short-term yields moved the other way, with the two-year slipping four basis points.

Investors weren’t simply betting on an imminent hike — they were demanding more compensation to hold long-dated debt, which is what happens when the market expects inflation to keep running. The Dow Jones Industrial Average closed about 1,100 points lower, its steepest one-day drop in more than a year.

Pressed on why the Fed hadn’t acted, Warsh said the decision “was the farthest thing from inertia I can imagine.” He also said he would “not be constrained” by traders betting on a September move.

What it means for your mortgage and credit card

If you’re house hunting, the squeeze has already started. Freddie Mac’s average 30-year fixed mortgage rate hit 6.66% as of July 30, the highest since August 2025.

Say you’re borrowing $400,000. At 6.66%, you’d pay nearly $2,500 a month including principal and interest. And the math assumes you’re putting 20% down with excellent credit. Weaker credit or a smaller down payment, and your quote will be worse.