President Donald Trump has criticized Fed Chair Kevin Warsh for the first time, after the FOMC raised rates in September. The Motley Fool argues that inflation linked to tariffs and the Iran war could push the Fed toward further hikes, which may weigh on Wall Street.
Trump turned on his own Fed chair in a recent Time interview, according to the Motley Fool. Until now, he had held back criticism of his handpicked nominee.
Trump told Time: "I don't blame Kevin Warsh." He added that he probably would have voted against the board in Warsh's place. The Motley Fool reads the answer as displeasure with Warsh's vote for a rate hike.
The Fed raised rates 25 basis points in September
The FOMC raised the federal funds target rate by 25 basis points on Sept. 16, and Trump spoke to reporters that day while standing behind Warsh. He blasted the other board members as hostile and political, and said interest rates were too high.
Under Warsh's predecessor Jerome Powell, the FOMC cut the rate six times between September 2024 and December 2025, to 3.50%-3.75%. Trump has repeatedly called for a cut to 1%. The Motley Fool expects more jabs at Warsh in the months ahead.
Inflation tied to tariffs and the Iran war
The Motley Fool says the Fed has good reason to act, because inflation has topped the FOMC's 2% target for 67 months and reached a three-year high of 4.2% in May. It blames two Trump policies, tariffs and the Iran war, for the surge.
New York Fed economists estimate that tariffs added 2.9 percentage points to goods price inflation by February 2026. Separately, the closure of the Strait of Hormuz has halted the flow of a fifth of the world's liquid petroleum, according to the article.
Markets price in more hikes
According to CME Group's FedWatch Tool, there is a 64% chance that the FOMC raises rates by at least 75 basis points by September 2027.
The Motley Fool warns that if a rapid increase in lending costs slows the AI data center build-out, it would not take much to push the Dow Jones, S&P 500 and Nasdaq Composite lower.
Source: The Motley Fool
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