US Federal Reserve raises key interest rate: Donald Trump has himself to blame for high interest rates

Donald Trump once again had reason to rumble on Wednesday evening. “Interest rates in the USA should be 1 percent or lower because we have by far the best credit rating,” claimed the US President on his social network. "Lower interest rates for the USA! Quickly!"

It's just too bad that those who are responsible for interest rates in the USA have done exactly the opposite. The 12 members of the Federal Open Market Committee decided on Wednesday to raise US key interest rates for the first time since July 2023. They raised it by 0.25 percentage points to a range of 3.75 to 4.00 percent. The US Federal Reserve justified this with the persistently high inflation in the United States.

In August, the inflation rate in the USA was 3.4 percent. And the Fed doesn't expect it to go down anytime soon. She currently expects that this year it will be a total of 3.7 percent. “The simple fact is that inflation is too high and has been for far too long,” said the new Fed chief Kevin Warsh, justifying the interest rate move. Like the European Central Bank (ECB), the US Federal Reserve is aiming for an inflation rate of 2 percent, but at the same time must also take the situation on the labor market into account. But it has developed relatively robustly.

By raising interest rates, the central bank is also turning against the US President under its new boss. Warsh was only appointed Fed chief in May. He succeeded Jerome Powell, who was also promoted to the post by Trump but quickly fell out of favor with the US president because he did not want to give in to his demand for low interest rates. Trump also called Powell a “stupid” and a “loser.” But Powell let the threats and insults roll off his back.

Even under Warsh, Trump is openly trying to intervene in the Federal Reserve's decision. “Lower interest rates or I will stop trading with countries with which we have a deficit,” Trump threatened the US Federal Reserve in early September.

Higher key interest rates not only make loans more expensive for companies and consumers and are therefore detrimental to the economy. They also make it more expensive for the government to take on debt. And under Donald Trump, the US debt mountain has already grown to over 40 trillion US dollars. The result: Investors were demanding a return of 5.025 percent for US bonds with a term of ten years even before the interest rate decision. This is the highest level since the 2007 financial crisis.

Trump himself is responsible for the high US inflation. First, his tariffs drove up inflation. Now there is the war with Iran, which is also causing gasoline prices to skyrocket in the USA and tearing a hole in the wallets of US consumers. Drivers in the USA currently have to pay an average of $4,319 for a gallon (3,785 liters) of fuel. That is around a third more than a year earlier.