Here's What Led to Federal Reserve Raising Interest Rates
Diesel topped $6.
The war in Iran persists.
So does the Russian war with Ukraine.
And the global trade war.
Inflation sits at 3.4%.
The American economy is feeling the weight. None of these things were what supporters had in mind when President Donald Trump returned to office in January 2027 with Republican majorities in the U.S. House and Senate.
But they are reality.
Candidate Trump promised voters that he would end the Russian war with Ukraine, eliminate inflation, and cut energy prices in half. And as President, Trump also said that he expected the war with Iran to last a few weeks.
The Russian invasion of Ukraine has lasted 55 months. Inflation is higher now than when Trump entered office. So are residential electricity costs, which have seen a double-digit hike. Gas prices are nearly 50% higher since the war with Iran began. Diesel prices are up by nearly two-thirds since then.
The war with Iran has lasted seven months rather than a few weeks.
Those factors threaten to overshadow some of the benefits from the One Big Beautiful Bill Act's expanded tax cuts, tax credits, $66 billion in new ag-focused spending in Agriculture Risk Coverage, Price Loss Coverage, Dairy Margin Coverage, crop insurance, trade promotion, and ag research.
The balance, though, is providing greater relief and support for farmers, ranchers, families, and small businesses without further escalating inflation.
Why Is President Trump Offering Americans $5,000?
President Trump is now offering $5,000 to each American adult but only if Republicans control Congress. Has any other president in modern history offered voters money if they keep his party in power like this?
The country's debt recently surpassed $40 trillion.
Should Americans be skeptical that Trump's latest $5k offer is real? Trump has made earlier promises of additional money to Americans. He claimed that he would give $2,000 per American adult from the tariff revenue. That never materialized. Neither did his pledged payment of 20% of the savings from DOGE.
If this new $5,000 payment offer happened, what will this do to inflation, something Trump has said that Joe Biden caused when he was president? Biden pushed nearly two trillion dollars into the economy in COVID-19 aid after Trump already added more than three trillion dollars of new spending into the economy with pandemic aid.
Why Did the Fed Raise Interest Rates?
Meanwhile, the Federal Reserve Board did not bring borrowers or potential borrowers any short-term relief. The Fed cited persistent inflation in its decision this week to raise interest rates. Raising rates is the opposite of what President Trump repeatedly tried to force the previous Fed chair, Jerome Powell, to do, along with the current chair Kevin Warsh.
But this wasn't just Warsh's decision. The Federal Open Market Committee (FOMC) was unanimous (12-0) in its announcement that it would raise the benchmark interest rate by a quarter point from 3.75% to 4.00%, the first rate increase in three years.
Savers may get some benefits. Borrowers? Not so much.
"The plain fact is that inflation is too high and has been for too long," said Kevin Warsh.
What's in the New Farm Bill Proposal?
The U.S. Senate Agriculture Committee approved a new version of the Farm Bill this week. But it won't go far any time soon.
U.S. House Speaker Mike Johnson put his chamber on recess until after the November mid-term elections after one of its members, Thomas Massie (R-KY), planned to offer articles of impeachment against U.S. Secretary of War Pete Hegseth for what Massie considers an unlawful war with Iran.
RELATED: Federal Reserve Bank of Kansas City Senior Vice President Nate Kauffman laid out strengths and challenges of the farm economy in this conversation with American Farmland Owner.
