Ex-Fed president says new chair must raise rates

Esther George, the former Kansas City Fed president who served on the rate-setting committee for more than a decade, told Fortune that Americans making long-term financial decisions should plan for higher borrowing costs rather than relief. George said inflation has stayed above the 2% target for more than five years and that three rate cuts late in 2025 may have loosened financial conditions more than warranted.

She added that the committee may need to consider reversing some of those moves.

Background on the new chair Kevin Warsh was confirmed by a 54-45 Senate vote in May and held his first meeting as chair on June 17. The committee voted unanimously to keep the benchmark federal funds rate at 3.5% to 3.75%. Nine of 18 committee members projected at least one rate increase before year-end.

Bank of America forecasts three quarter-point hikes this year that would lift the range to 4.25%–4.5%.

Limits of monetary policy George said tariffs, an energy price spike tied to the conflict in Iran, and immigration policy are squeezing household budgets in ways that interest-rate policy cannot fully offset. She noted that the central bank can only use its interest-rate tool to address inflation.

George said she worked with Warsh during his earlier term on the Board of Governors and expects him to focus on areas where the central bank has direct impact. She also said she expects the institution to maintain independent decision-making. "If I were someone planning with that kind of horizon, I'd plan for higher rates coming ahead," George told Fortune.