White House spokesperson Kush Desai stated on Fox News that the Federal Reserve's rate hike that day was a "quite unfortunate decision," lacking particularly persuasive economic reasons from the perspective of the administration, attributing the current price increases to energy supply shocks.

The Federal Open Market Committee raised the federal funds rate by 25 basis points to 3.75%–4.00% with a unanimous vote of 12-0, marking the first rate hike since July 2023. Chair Powell emphasized the commitment to price stability and stated that independence is bidirectional, refusing to comment on discussions with the president regarding interest rates.

The president subsequently called for lowering the rate to 1% or lower and again linked the trade deficit to "immediate rate cuts." Before the meeting, he threatened to halt trade with deficit partners. The dot plot still indicates that most members expect at least one more hike within the year.

After the announcement, the stock market turned from green to red, with the Dow Jones falling 631 points. The two-year Treasury yield, most sensitive to policy, rose over 7 basis points, while the ten-year yield reached about 5.02%. The market is trading on expectations of a second rate hike and political conflict, rather than the already implemented 25 basis points.

Mechanically, this represents a dual impact of the administration's statement combined with the unanimous rate hike: short-end pricing aligns with the committee, while risk premiums align with White House rhetoric. Cash and anti-inflation positions benefit, while stock duration and interest-sensitive credit come under pressure. Funds are moving from risk assets to short-term bonds, waiting to see if the next statement will apply more pressure or provide more dot plot guidance.

Source: Public Information