Fed Chair does his job, not Trump's command

Fed Chair Kevin Warsh and the other 11 members of the central bank's Federal Open Market Committee last week carried out their mission to control inflation by managing monetary policy and raised the key interest rate to 4%, even though President Donald Trump has been demanding that borrowing costs be cut.

Actually, more than demanding, as Trump has been threatening to cut off trade with any country that the U.S. has a trade deficit if interest rates aren't cut (a disastrous move). And after the Fed's action, the president said on his Truth Social that interest rates should be set at 1% or lower. Thankfully, Warsh and the Fed aren't listening to him.

Trump may have thought he was getting his own guy with Warsh (having replaced Jay Powell, who Trump appointed, but later wanted prosecuted), but the new chair in office since May has been true to his duty to steward the economy, not to cater to the whims of the erratic man of the White House.

The Fed is meant to be independent of the political branches of the government and take the long-term view of the country's economic stability, not what presidents or members of Congress may want. It's an excellent system that has helped maintain a robust and growing nation for decades.

The FOMC sets the price of money, interest rates. When prices are rising too fast, exceeding the target of 2% inflation, the FOMC slows things down by ratcheting up rates, like they did last week, for the first time in three years, boosting the federal funds rate by .25 percentage points from 3¾% to 4%. And another increase is likely coming.

Trump himself has actually made inflation worse, with his nutty (and illegal) tariffs on the whole world and with the Iran war and resulting instability of moving oil through the Strait of Hormuz. Even excluding the volatile food and energy prices, core inflation is running at 3%, well above the desired 2%.

Warsh, who said last week after the vote that, "The plain fact is that inflation is too high and has been for too long," wasn't alone. The president of the Federal Reserve Bank of New York (who always serves as the FOMC vice chair) along with presidents of the regional Federal Reserve Banks of Dallas, Cleveland, Minneapolis and Philly all agreed.

So did the six other Fed governors, including Michelle Bowman and Chris Waller (both appointed by Trump) and Powell (Trump's first chair), as well as the three governors appointed by Joe Biden.

One of those is Lisa Cook, who Trump has been trying to fire, an outrageous assault on the Fed's independence that has so far been blocked by the U.S. Supreme Court.

Last week's rate hike shows why the Fed must be unswayed from White House dictates and threats and firings. They must act solely on behalf of the economy, balancing low interest rates with inflation and high interest rates and stalling economic growth.

Of course, a rate hike will hurt consumers' credit cards, mortgages and other borrowing, but it's necessary medicine to prevent even more damaging inflation which can hurt even more.

Trump doesn't understand the economics and doesn't care. He just wants what he wants. We are lucky that the Fed remains free to act as it must.