Wash Chooses Price Stability... Rates Could Be Raised 1–2 More Times by Next Year [US Rate Hike for the First Time in 3 Years]

[Financial News New York/Seoul = Correspondent Lee Byeong-cheol, Reporter Park Jong-won] Observations are emerging that U.S. Federal Reserve Chairman Kevin Warsh, who took office last May, has shifted monetary policy toward tightening by raising the benchmark interest rate for the first time. The market expects the Fed to raise rates one or two more times by next year, a move that directly contradicts the wishes of U.S. President Donald Trump, who is calling for rate cuts.
■ Wash: "Inflation is too high"
The Federal Reserve announced on the 16th (local time), following its regular Federal Open Market Committee (FOMC) meeting, that it would raise the benchmark interest rate by 0.25 percentage points. At a press conference that day, Chair Wash stated, "Today's policy action will contribute to bringing inflation back to the Committee's target of 2% in a more timely manner," adding, "Our Committee will achieve price stability." He emphasized, "The clear fact is that inflation is too high, and the trend has persisted for too long."
The U.S. Consumer Price Index (CPI) for August, announced on the 11th, rose 0.4% from the previous month, a significant increase compared to July (0.1%). It also increased 3.4% year-on-year. In particular, energy prices in August rose 2.1% in a single month as international oil prices surged due to the war between the U.S. and Iran, with gasoline prices jumping 3.9%. Compared to a year ago, energy prices have skyrocketed by 16.3%.
The Federal Reserve has kept its benchmark interest rate unchanged for the fifth consecutive time this year. On the 16th, Chair Wash stated that "it is difficult to view current overall financial conditions in the U.S. as contracting," adding, "Therefore, we have removed some of our accommodative measures." At the same time, he assessed that "today's decision was made at a time when the U.S. economy appears to be strengthening," noting that "indicators such as new hiring, private sector income, and corporate capital investment have improved over the past few months and are pointing in a positive direction."
Earlier, U.S. non-farm payrolls rose by 162,000 in August, significantly exceeding market forecasts of 53,000. The scale of the increase expanded more than sevenfold compared to the 21,000 new jobs recorded in July. The unemployment rate also remained unchanged from the previous month at 4.1%. While the Fed was considering tightening policies to curb inflation, it appears to have concluded that the economy and employment are holding up enough to withstand interest rate hikes.
On this day, the Federal Reserve projected that the growth rate of U.S. real gross domestic product (GDP) would be 2.3% this year and 2.4% next year. This represents an upward revision of 0.1 percentage points for each figure compared to the forecast made last June. The expected unemployment rate was also lowered to 4.1%, down 0.2 percentage points from the forecast made last June.
■ Could raise two more times within a year
In an announcement today, Chair Wash emphasized that forward guidance on interest rate policy would not be provided in the future due to the possibility of errors arising from irregular fluctuations. However, 18 of the 19 FOMC members, excluding Chair Wash, participated in the vote on the dot plot released today. The dot plot is a document in which members plot the interest rate forecasts they consider appropriate at the end of each year as dots.
The median average of the 18 members' year-end interest rate forecasts was 4.1%, higher than the base rate (3.75–4%). This is 0.3 percentage points higher than last June. Of the 18 members, four projected 4.25–4.5% in the dot plot, while 12 projected 4–4.25%. Only two members projected 3.75–4%. There are two FOMC meetings remaining this year, in October and December.
Kay Hague, Chief Investment Officer (CIO) at Goldman Sachs Asset Management, pointed out on the 16th via CNBC that the October FOMC meeting is close to the U.S. midterm elections in November. She predicted that the Federal Reserve could skip the October meeting and raise the benchmark interest rate by an additional 0.25 percentage points in December. On the same day, the UK's Financial Times (FT) argued, based on an analysis of the futures market, that there is a possibility the Fed will raise interest rates at least two more times by September 2027.
President Trump, who has called for interest rate cuts since his first term, pushed back against this decision. Immediately after the rate announcement, he wrote on social media, "U.S. interest rates should be 1%." Meeting with reporters on the same day, President Trump revealed that he had spoken with Chair Wash just before the rate decision, stating, "I told him that since the outcome wouldn't change anyway, it would be better to vote in line with the Board." He added that he told Chair Wash, "Do as you please."
[email protected] None Reporter