Following the Federal Reserve’s decision to hike rates by 25 basis points, economist Justin Wolfers criticized President Donald Trump for threatening trade tariffs in response to central bank policy, stating the linkage “makes no economic sense.”
Policy Defiance
Wolfers highlighted the full consensus within the central bank as evidence that policy reflected economic data rather than political pressure.
“Threatening tariffs on other countries because the Fed made a domestic rate decision makes no economic sense, and today’s vote made the point for me: 12 out of 12 FOMC members voted for this hike,” Wolfers stated.
Tariff Threat Reaction
Prior to the meeting, President Trump posted demands for rates at 1% or less, threatening to stop trade with deficit nations if rates remained high. Wolfers dismissed the ultimatum, observing that trade deficits and domestic borrowing costs operate on unrelated economic principles.
“The president was essentially threatening to do something really bizarre unless the Fed did what he wanted,” Wolfers noted, stating Chair Warsh “called his bluff.”
Wolfers concluded that “the only person who thinks rates should be lower is the White House, and I suspect that says more about politics than about the state of the economy.”
However, after the Fed announced its decision, Trump told reporters that he asked Warsh to “vote with the board.”
Unanimous Rate Hike
The Federal Reserve raised the target federal funds rate by 0.25 percentage point to a range of 3.75% to 4.00%. All 12 voting members of the Federal Open Market Committee supported the increase.
The quarter-point increase represents the Federal Reserve’s first rate hike since 2023. Newly appointed Chair Kevin Warsh joined every voting member—including committee officials appointed by former Presidents Barack Obama, Joe Biden, and Donald Trump—in approving the policy move. The decision came despite explicit demands from the White House to slash interest rates to lower levels.
The CME Group’s FedWatch tool projections show markets pricing in a 54.2% likelihood of the Federal Reserve hiking interest rates after its October meeting.
How Have Stock Markets Performed in 2026?
The S&P 500 index has advanced 10.32% year-to-date. Similarly, the Nasdaq Composite index is up 11.77%, and the Dow Jones gained 7.07% YTD.
On Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed mixed. SPY fell 0.44% to $754.05, while QQQ rose 0.026% to $704.72. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), also ended 1.15% lower at $515.22.
In premarket on Thursday, SPY was up 0.84%, QQQ gained 1.05% and DIA advanced 0.77%.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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