The Federal Reserve raised its benchmark federal funds rate—the overnight rate at which banks lend to one another—by 25 basis points, a quarter of a percentage point, on Wednesday, lifting the target range to 3.75%–4.00% in a unanimous vote—the central bank's first rate increase since 2023. The decision makes clear that Chair Kevin Warsh's repeated warnings on inflation were more than rhetoric.

"The economy has indeed strengthened," Warsh told reporters at his post-meeting press conference. "Inflation is the problem."

The remarks capture the bind in which Warsh now finds himself: endorsing President Donald Trump's assessment that growth is solid, only to tighten policy anyway—the opposite of what Trump has been demanding for months. The rate-setting committee has evidently concluded that economic strength alone is not sufficient justification for lowering interest rates.

Higher interest rates make borrowing more expensive for households and businesses—raising the cost of everything from mortgages and car loans to corporate credit—which slows spending and, in theory, limits the inflation that goes along with it. But they also tend to weigh on assets that thrive on cheaper capital, such as stocks and Bitcoin, while making safe government bonds pay better and pulling cash away from riskier bets.

Asked directly about Trump's reaction to the decision, or what the president expects next, Warsh declined to comment. He instead repeated the line he used in his keynote at Jackson Hole, the Fed's annual economic policy symposium, in August: "We will deliver price stability. We're committed to a discipline, not a decision."

Markets had largely done the math in advance. Wall Street had priced in a 25-basis-point move for weeks, and Bitcoin—though it briefly and unexpectedly spiked following the announcement—ultimately barely flinched, trading near $75,500 and down about half a percent on the day.

artificial intelligence, Warsh was careful to draw a line around his own job. "I've spent a lot of time thinking about AI," he said, but he argued that Fed independence means staying out of AI policymaking itself. "The policy decisions on AI are made by other parts of the government. Implications of those decisions have impact on our jobs, and that's what we'll focus on," he said, adding that the central bank cares "much about the implications on the demand side of the economy."

That stance is consistent with the five task forces Warsh established earlier this year, one of which is dedicated to studying AI's effect on productivity and jobs rather than the technology's broader risks.

The Fed's updated economic projections—the committee's own forecasts—still point to one more rate increase before the end of the year. The committee typically calibrates such moves to incoming inflation and employment data. If Warsh follows through on that signal, Wednesday's move will not be the last rate decision that Bitcoin and the rest of the market have to shrug off—having seen it coming.