Kevin Warsh was asked about the president on Wednesday and declined to answer. “Part of the independence of the Federal Reserve is we stay in our lane,” he said, after a 12-0 vote to raise interest rates for the first time in 3 years and an all-caps demand from the White House to do the opposite. Most of the coverage since has been about the fight. I want to look at the thing the fight is over, because the Church has a phrase for it. She names “a stable currency” as one of the conditions a just economy rests on, and she says it in 3 separate documents. The people that phrase protects are the ones who never get asked.
The News Story
The Federal Reserve raised its benchmark interest rate on Wednesday, the first increase since July 2023, and Chair Kevin Warsh used the move to hold the line against months of public pressure from President Trump for cheaper money.
The Federal Open Market Committee voted 12-0 to raise the federal funds target range from 3.5% to 3.75%, with an upper limit of 4%. The quarter-point increase reverses a cut made last December and follows five straight meetings this year at which the Fed left rates alone. At the July meeting, 3 of the 12 voting members dissented in favor of a hike, the largest bloc of same-direction dissents in a decade.
The committee’s statement said economic activity “is expanding at a solid pace” and that “inflation remains elevated,” adding that “today’s policy action will support a timelier return to the Committee’s 2% goal.” Warsh, who took over the central bank in May, told reporters that “the plain fact is that inflation is too high and has been for too long,” and that “this summer’s inflation readings do not tell me that underlying trends have meaningfully improved.” He put the unemployment rate near 4.1% and said the employment half of the Fed’s mandate is in good shape, citing rising job openings and weekly hours.
Consumer prices rose 3.4% in the 12 months through August, unchanged from July, according to Labor Department data released last week. Warsh said the Fed’s preferred gauge, the personal consumption expenditures index, likely ran near 3.6% in August. Much of the pressure traces to energy. Crude prices sat above $105 a barrel on Wednesday, roughly 50% higher than before the Iran war began in late February, and AAA put the national average for gasoline above $4.30 a gallon. Saudi Arabia shut a major pipeline bypassing the Strait of Hormuz over the weekend, further tightening supply.
New projections show the median official expecting one more quarter-point hike this year, with rates then holding through 2027. Axios reported that 12 of 18 officials anticipate one additional increase and four see two. The median forecast puts overall PCE inflation at 3.7% for 2026, falling to 2.3% in 2027, with unemployment at 4.1% by year-end, revised down from 4.3% in June.
Trump responded Wednesday afternoon on his social media platform: “LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!” He had previously called committee members “clowns” for favoring a hike and threatened to cut trade ties with countries running surpluses against the United States if borrowing costs stayed high. Warsh declined to answer on politics. “Part of the independence of the Federal Reserve is we stay in our lane,” he said, calling independence “a two-way street.”
Stocks fell after the announcement. The Dow Jones Industrial Average was down about 1.3% in late-afternoon trading, the S&P 500 about 0.5%, and the Nasdaq Composite was slightly lower. The 10-year Treasury yield hovered near 5%, its highest since 2023. Warsh attributed that climb to economic strength, corporate competition for capital, and geopolitics.
The FOMC meets again October 27-28 and December 8-9. [1]
Catholic Social Teaching Analysis
One Phrase, Three Documents
In 1991, John Paul II sat down to write what the state owes a market economy, and he produced a short list. Economic activity, he wrote, “cannot be conducted in an institutional, juridical or political vacuum. On the contrary, it presupposes sure guarantees of individual freedom and private property, as well as a stable currency and efficient public services.” Then he said why: “so that those who work and produce can enjoy the fruits of their labors and thus feel encouraged to work efficiently and honestly.” [2]
The Church liked that list enough to keep it. The Catechism quotes the passage word for word under the heading “The responsibility of the state.” [3] The Compendium of the Social Doctrine of the Church quotes it again in its treatment of the state’s role in economic life. [4] So the phrase “a stable currency” sits in an encyclical, in the Catechism, and in the Compendium, and in all 3 places it keeps the same company: individual freedom and private property. The Church puts money that holds its value on the same shelf as the right to own a house.
That placement tells you how she thinks about it. A currency is a promise. When you take a paycheck in dollars, you’re accepting a claim on goods you haven’t bought yet, and you’re trusting that the claim will be worth roughly the same next month. Inflation breaks that promise a little at a time. Nobody votes on it. Nobody signs anything. The number on the check stays the same and the groceries it buys shrink. That’s why I call it the quiet tax. It falls without a bill, and it falls on the people who hold their wealth in wages and savings rather than in assets that rise with prices.
Who Pays The Quiet Tax
Leo XIII understood the wage earner’s position in 1891 better than most economists do now. In Rerum Novarum he describes a workman whose wages are enough to support his family, and says such a man “will not fail, by cutting down expenses, to put by some little savings and thus secure a modest source of income. Nature itself would urge him to this.” [5] The whole encyclical turns on that picture: a laborer who can save, and whose savings become property that’s fully his. Leo hoped the law would make owners of as many workers as possible.
Now run 3.4% inflation through that picture for 3 years. The “little savings” Leo praised lose about a tenth of their purchasing power while sitting untouched in a bank account. The worker did nothing wrong. He practiced exactly the thrift the pope commended, and the currency took a cut anyway. The Compendium says a wage “is the instrument that permits the laborer to gain access to the goods of the earth,” and that a just wage “must not be below the level of subsistence.” [6] A wage fixed in a currency that’s losing 3.4% a year is a wage being renegotiated downward every month, by nobody, with no one across the table.
And the loss is regressive. A family with a mortgage locked at 3% and a stock portfolio comes through a stretch of inflation more or less whole; the house and the shares reprice upward. A family that rents, drives to work, and keeps its emergency fund in cash gets hit at the pump ($4.30 a gallon this week), at the register, and in the savings account, all at once. Pope Leo XIV wrote in Dilexi Te that it “seems reasonable to organize the economy in such a way that sacrifices are demanded of the masses in order to serve the needs of the powerful,” and he called that a structure of sin. [7] He also noted about Europe that “more and more families find themselves unable to make it to the end of the month.” [8] Inflation is one of the most efficient machines ever built for producing that second sentence. It transfers wealth from cash holders to asset holders and from savers to borrowers, and the largest borrower in the country is the federal government, which is why governments across history have found cheap money so attractive.
That’s the moral weight behind a technical decision. When the committee says “inflation remains elevated” and votes to raise the cost of credit, it decides to protect the value of the wage over the convenience of the debtor. The Church has a view on which of those deserves protection first.
Staying In Their Lane
None of this makes the Federal Reserve a saint, and the Church’s tradition is wary of exactly the kind of power it holds. Pius XI wrote in 1931 about those who, “since they hold the money and completely control it, control credit also and rule the lending of money,” so that “no one can breathe against their will.” [9] He was describing private financiers, but the description fits a central bank at least as well. A dozen people in a room in Washington set the price of money for 340 million people. That’s an enormous authority, and the fact that it’s exercised by technocrats rather than politicians makes it more delicate, since the ordinary check on abuse, the ballot, doesn’t reach them.
So the Church measures independence by the same test she applies to every public authority. The Compendium says the state’s intervention in the economy “must be neither invasive nor absent, but commensurate with society’s real needs.” [10] It says public administration is “the steward of the people’s resources, which it must administer with a view to the common good.” [11] And it lists the virtues that make power into service: “patience, modesty, moderation, charity,” exercised by people “who are able to accept the common good, and not prestige or the gaining of personal advantages, as the true goal of their work.” [12]
Read Warsh’s press conference against that list. Patience: rates held for 5 straight meetings before a vote to move. Moderation: a quarter point, with a projection of one more, rather than a shock. Modesty: he attributed the rise in the 10-year yield to the economy and geopolitics, and took no credit for anything. And the refusal to answer questions about the president is a form of the last virtue on the list. A chair who traded a rate cut for a president’s goodwill would be seeking personal advantage with the people’s currency, which is exactly what Compendium 410 forbids. Independence from the president matters because the currency belongs to the people and to their children, and the electoral calendar runs 4 years at a time.
Warsh called that independence “a two-way street,” and I think that’s the honest half of the sentence. The Fed’s lane exists to serve the common good without asking permission. The same lane obliges it to serve the common good rather than the banks, the markets, or its own reputation. The Church grants public authority its autonomy for the sake of what the authority is for. An independent central bank that let the quiet tax run for years without acting would have kept its lane and betrayed its purpose.
What The Rate Is For
I don’t know whether 3.75% to 4% is the right number, and the Church doesn’t claim to either. A hike hurts too. The 10-year Treasury near 5% means more expensive mortgages, more expensive car loans, and a slower hiring market for the same families the rate is meant to protect. The committee is trading a certain cost now against a higher cost later, and reasonable people will read the tradeoff differently. That’s a prudential judgment, and Catholics can disagree about it in good faith.
What the Church settles is the question underneath: what money is for. John Paul II put the answer in the same sentence as the phrase “a stable currency.” The point of the guarantee is “so that those who work and produce can enjoy the fruits of their labors.” [2] The currency exists for the worker, so that a day’s labor buys the same bread next spring that it buys this fall, and so that the little savings Leo XIII wrote about are still savings when the family needs them. Every other consideration, the president’s preference, the market’s mood, the Treasury’s borrowing costs, the chair’s own reputation, sits below that one.
A 12-0 vote to defend the value of the paycheck against the loudest man in the country is, whatever else it is, a decision to take the Church’s list seriously. The chair may never have read Centesimus Annus. He acted as though he had.
This story turns on the state’s duty to guarantee a stable currency: the Church’s teaching that money which holds its value belongs beside private property and individual freedom as a condition of justice, because it protects the fruits of labor for those who work and save.
One principle from the Church’s social teaching, applied to the week’s news, in your inbox each Saturday.
Footnotes
- “Federal Reserve Hikes Interest Rates for First Time Since 2023 Amid Stubborn Inflation,” Fox Business, September 16, 2026, foxbusiness.com; “Fed Raises Interest Rates by Quarter Point to Tackle Inflation,” The Washington Post, September 16, 2026, washingtonpost.com; “Fed Raises Rates a Quarter Point in First Move of Warsh Era,” Axios, September 16, 2026, axios.com; “Federal Reserve Raises Interest Rates for the 1st Time Since 2023,” ABC News via KVIA, September 16, 2026, kvia.com; “Fed Approves Interest Rate Hike, Signals One More to Come This Year,” CNBC, September 16, 2026, cnbc.com; “Fed Raises Rates for First Time Since 2023, Defying Trump as Inflation Mounts,” NBC News, September 16, 2026, nbcnews.com; “Fed Raises Interest Rates for the First Time Since 2023,” CNN Business, September 16, 2026, cnn.com; “Fed Raises Rates as Warsh Bucks Trump to Contain Inflation,” Bloomberg, September 16, 2026, bloomberg.com; “Federal Reserve Hikes Key Rate for 1st Time in 3 Years, Defying Trump Demands for a Cut,” Associated Press via Local 10, September 16, 2026, local10.com. ↩
- Pope John Paul II, Centesimus Annus (Vatican City: Libreria Editrice Vaticana, 1991), no. 48, vatican.va. ↩
- Catechism of the Catholic Church, 2nd ed. (Vatican City: Libreria Editrice Vaticana, 1997), no. 2431, quoting Centesimus Annus, no. 48, vatican.va. ↩
- Pontifical Council for Justice and Peace, Compendium of the Social Doctrine of the Church (Vatican City: Libreria Editrice Vaticana, 2004), no. 352, vatican.va. ↩
- Pope Leo XIII, Rerum Novarum (Vatican City: Libreria Editrice Vaticana, 1891), no. 46, vatican.va. ↩
- Pontifical Council for Justice and Peace, Compendium of the Social Doctrine of the Church, no. 302. ↩
- Pope Leo XIV, Dilexi Te: On Love for the Poor (Vatican City: Libreria Editrice Vaticana, 2025), no. 93, vatican.va. ↩
- Pope Leo XIV, Dilexi Te, no. 12. ↩
- Pope Pius XI, Quadragesimo Anno (Vatican City: Libreria Editrice Vaticana, 1931), no. 106, vatican.va. ↩
- Pontifical Council for Justice and Peace, Compendium of the Social Doctrine of the Church, no. 351. ↩
- Pontifical Council for Justice and Peace, Compendium of the Social Doctrine of the Church, no. 412, quoting Pope John Paul II, Message for the 1998 World Day of Peace, no. 5. ↩
- Pontifical Council for Justice and Peace, Compendium of the Social Doctrine of the Church, no. 410. ↩
Books Cited
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- Catholic Church, Catechism of the Catholic Church, 2nd ed. (Doubleday / Image, 2003)
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