What the Fed Rate Hike Means for You

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She had never laid side-by-side with her sister face-to-face. We'll tell you the story of two-year-old sisters who can now look each other in the eye. From ABC News, this is Start Here, I'm Mike DeBuskey. Hey there, Brad is out for today and tomorrow, so you've got me in the meantime. If there's been one defining story of American life in 2026, it's that things are really expensive. We use a lot of diesel for agriculture. You're not going to leave the crops in the field. You're going to go pay the price whether it's $6 or $7. Last week, diesel prices in the U.S. set a new record. Surging past $6 a gallon on average according to GasBuddy, diesel is the fuel of trucks. Which means it costs more for retailers to move their product around. In fact, one industry expert noted that for every $1 increase in diesel, truckers spend about $400 more per tank. Farmers also use diesel in their heavy equipment to produce the food we eat driving up prices at the grocery store. Fuel gas for your car is now about $4.40 a gallon on average. Meanwhile, borrowing costs for houses are getting pricier as well. With the average rate on a 30 year fixed rate mortgage, now sitting at 7.24%, that's up more than a full percentage over this time last year. Global government data shows that prices for the month of August are 3.4% higher than they were a year ago, and that cascading series of events has over the course of this year put a ton of pressure on the Federal Reserve to do something about inflation. And on Wednesday, they did. Let's get into it with ABC's Elizabeth Schultzie who covers the economy for us. Elizabeth, okay, so rates are going up by how much? So Mike, this was a quarter point interest rate hike from the Federal Reserve. And this is the first time the Fed has hiked rates in three years, so a big moment here when you think about the Fed taking this position that it needs to do something, use its policy tool available, which is changing interest rates to try to fight inflation. From more than five years, inflation has been running above target. So our predominant focus is on the price stability side of our mandate. The Fed was unanimous in this decision. It was all members of the Fed that voted said they think that rates should go up right now, which really speaks to the fact that inflation is too high and that the Fed wants to do what it can to try to bring it down. And just to kind of explain how that works, the idea is that higher interest rates make it more expensive for businesses and consumers to borrow money. And that idea that slowing down spending should help bring down prices. That's really what the Fed is aiming to do here. Right. Right. That makes sense. So you also mentioned that this is the first rate hike we've seen since 2023. It's also the first major interest rate hike move that we've seen from Kevin Warsh, who is the new chairman of the Federal Reserve, his predecessor Jerome Powell, he didn't have a great relationship with President Trump Elizabeth in large part because of interest rates. What have we heard from the president about all this? I mean, this was a defining moment for President Trump's hand-picked Fed Chairman, Kevin Warsh. Despite President Trump's repeated calls that the Fed should be lowering interest rates right now, Kevin Warsh oversaw an interest rate hike. And in fact, the Fed signaled it could hike rates again just this year. I actually was at the Fed news conference and I had a chance to ask Kevin Warsh directly, what's your message to the president that you are doing something, the opposite, that he's been asking for you to do? I've got nothing for you on a discussion with the president, so, but I won't make that count as your question. On the American people, as I said in my prepared remarks, the least well-off are the ones who have the most to gain from stable prices. He didn't really answer there. As you could see in any question about Trump that he was asked, he dimmered. But this was a moment for Kevin Warsh to say the priority right now for the central bank is fighting inflation. And he said when I asked him what impact will this have on American households, he made clear that it's all about trying to stabilize and bring down prices. We cannot affect any individual price. Whether it be oil prices, whether it be foodstuffs at the grocery store, or what we can do and we'll do is ensure that any change in relative prices don't broaden out. And unsurprisingly, Mike, not too long after this decision by the Fed, we did hear from President Trump who said the Fed should be lowering rates. The interest rates are too high. We should be paying the lowest interest rate anywhere in the world because we have the strongest credit. Any economist that you talked to right now would not say that this is a scenario where the central bank would typically be lowering rates normally when there's inflation you raise them. But the President, I think it is worth noting, he didn't directly attack Kevin Warsh in the same way that he had for years gone after Jerome Powell. I mean, I'm relying on Kevin, but he's got a very tough board. He's got a board that was put there by a lot of other people. Instead, in response to a question from our colleague Karen Travers, he attacked the other members of the Federal Reserve's board and he sort of gave an out to Kevin Warsh. Okay. Elizabeth, bottom line here, what does this mean for everyday people as well as we're hearing Kevin Warsh say this is aimed at teaming inflation. What are analysts saying about the likelihood of prices actually coming down? Well, first of all, what we are going to see pretty much immediately is that borrowing costs will get higher, especially when it comes to credit cards. Credit card rates are directly tied to the Fed's key interest rate. So those are probably going to go up at least a little bit. You already have mortgage rates spiking more above seven percent. And when you're thinking about mortgage rates, we were just below six percent before the Iran war. A percentage point increase like that can make hundreds of dollars of difference on a monthly payment for a new home loan. So that is a significant difference for people who are trying to buy or sellers who are trying to get other people to buy their homes right now. Who will likely see car loan rates go up. So that's where those borrowing costs get more expensive. If you're a business, it's more expensive to take out a new loan that which a lot of businesses have to do to keep their operations running. But then you've got the other piece of this where the Fed hopes over the long term we do start to see prices come down. But I will say Mike, that is still a little bit of a question mark because a lot of the increase and prices that we've seen over the past couple of months has been from the spike in oil. At the end of the day and Kevin Warsh admitted this, there's not a lot that the Fed can do to change the dynamics and the oil market. So it's not like gas prices will change because of this moved by the Fed or diesel prices or home heating bills. But the Fed hopes that kind of some of those underlying prices in the economy that have been persistently strong could ease a little bit and that could relieve some of the pressure for households. Right. The Fed only has so many tools to tame some of these high prices. Well, Elizabeth, thanks so much for breaking all that down for us. I really appreciate it. Anytime. Thanks Mike. Next up on Start Here, Doge meets a watchdog. That's coming up. This show is sponsored by Horizon 3. A weird thing about life. Can you feel secure without actually being secure? I don't know. Have you ever accidentally nicked yourself while chopping vegetables or shaving? You've done those tasks a thousand times in your life. Not that you barely think of them as having any risk at all, but familiar is not the same as a risk-free. It's the same thing with cybersecurity. The threat you need to worry about isn't usually the risk you see coming. It's the risk you didn't even know existed. Horizon 3 is an AI-native proactive security platform that changes that. It's a way to see what a hacker would find in your environment before they do. 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So we just told you about how the government raising interest rates could impact your spending. Well, as it turns out, the government itself has been doing some pretty big spending of its own. If you think back to the early days of the Trump administration, the Department of Government efficiency was on a tear, slashing programs, offices, and positions across the federal government. Thousands of workers fired at the Department of Health and Human Services. The latest target, the IRS. The agency now beginning to lay off more than 6,000 employees across the country. Doge, as it was called, pitched this effort as a way to cut down on bureaucracy. Here's how Elon Musk who ran the program described it. Part of this effort was what came to be known as the "Fork in the Road." That was the subject line of an email that some federal workers received last year, inviting them to take a one-time offer to leave the workforce and get paid through September of 2025. Some 140,000 of them did, and now, one year later, we're getting a look at exactly how much that cost. Ben Siegel, our deputy political director here at ABC, has been covering this for us. Okay, Ben, this is a new watchdog report. Tell us where this came from and what it tells us. Government accountability office, Mike, is a nonpartisan watchdog that looks through government spending and how money is being spent across the federal government sometimes at the request of Congress. They came out with a new report that concluded that the federal government paid employees about $9.5 billion in 2025 not to work as a result of that offer made to workers to leave the government as part of the Doge effort. It started with that email, the "Fork in the Road" note that you alluded to. This "Fork in the Road" note went out to about 2 million federal workers in January of 2025. Right after Donald Trump took office again, it was a one-time only offer it was said to allow them to leave the government and get paid out for it, to keep them on the books through the end of the fiscal year in September of 2025 if they decided to leave the workforce about 140,000 federal employees, including many that were near retirement, age took up the offer. So they were paid out for the remainder of that year and we now are being told that that cost the government about $9.5 billion again. The government spends just to put this in context between $6 and $7 trillion a year. And that $9.5 billion is about six times the same amount spent on paid administrative leave by the federal government for federal workers since 2023. Right, so a really big increase. Doge's whole goal was to save the government money. Were they effective in that goal? What do we know about that? It's a mixed bag. We know that Elon Musk and leaders of the Trump administration had pledged $1 trillion in savings. You've been watching Doge where we've found billions, tens of billions of dollars of fraud and waste and abuse and that's just the beginning. And they won about this in a very aggressive way, you know, this effort to effectively push out workers who weren't aligned with the programs that were opposed by this administration, just the cutting off of funds and the dismantling of agencies like the agency for international development, USAID, which has since been folded in to the state department. This has been fought over in court so many times across the government. And it's really a mixed bag when you look at the bottom line here, the administration and its allies have claimed about 200 billion in savings. When you look at getting workers out of the workforce, when you look at some of these programs that are no longer being funded, but the bottom line is that outside independent groups have had a hard time verifying that figure. And the other thing to keep in mind is that Congress controls the purse strings of federal spending. A lot of this was done without congressional approval. Now there were some cuts that were made, cuts to public broadcasting, some other initiatives that were passed by Republicans in Congress, several billion dollars, but it's been hard to really validate the claims that have been made. And Mike, on top of that, you know, federal spending has gone up since the president took office, the combination of the war in Iran, and then less federal tax revenue coming in as a result of tax cuts passed by Republicans and signed by President Trump. There's a lot less money revenue coming into the federal government, more money being spent, so it is really a mixed bag when you zoom out and you take a look at federal spending since Donald Trump became president again. Yeah. So if you take all those data points, then Ben, as you said, kind of all over the map. Do we have any insight into what the future of federal government cuts could look like? Does this give us any sort of clue with regards to, you know, future employment for federal employees? What I can say right now is that the federal government workforce has been dramatically reshaped. It has shrunk to the lowest number in decades, and it's not clear if it will rebound from that. Debt, of course, Democrats will try to undo some of these cuts that were made unilaterally by the Trump administration if they retake power, either in Congress or in the White House one day. As you know, because Congress did not sign off on most of these changes, these aren't set in stone, it's possible to potentially undo some of that. But politically, will there be the appetite to have these fights once again by both sides? It's hard to say exactly where this leads. We know the Trump administration is responding to this report by making the case that, well, yes, this was a one time hit of $9.5 billion to on paid leave, about $6.7 billion of that directly from the deferred resignation program. But this was the price to get people off the government's books in the future. They argue federal payrolls will be lower. The government will not be spending this money on the employees that have left. But again, the bottom line is that it's hard to say how durable those cuts will be because this did not get the kind of buy-in from Congress that we've seen in the past. Well, Ben Siegel, I know you're going to continue to track this for us. Thanks so much. Thank you. There's some good news to tell you about from the medical world. On Wednesday, doctors from two Missouri children's hospitals, Cardinal Glenin and Rankin Jordan, announce they successfully separated a pair of conjoined twin girls. We are absolutely delighted to share that the surgery was successful, and we are honored to introduce you to the team who made it possible. It's historic for a number of reasons. For one, these two-year-old girls, Hyab and Wahopto from Ethiopia, were conjoined at the head, facing away from one another. Now surgeries like this to separate twins are extremely rare. There have only been about 60 successful procedures ever done, and this particular operation, which actually happened back in February, was the first in the United States conducted by a woman. Each decision was informed by months of planning and collective expertise of a highly coordinated team, dedicated to giving these girls the best possible opportunity for the future. We have the girls' main U.S. caregiver here, Kate Corbet, Senior Director of Stewardship and Engagement from World Pediatrics. They're the global organization that put together this global medical and humanitarian partnership. Kate, thanks for talking to me. First things first, how are the girls doing right now? They're doing really well. This is their nap time now after working hard all morning, but overall, they're doing fantastic. That's great to hear. I understand that in the weeks and months after that, there were some really incredible moments between these two girls, because they were conjoined at the head, facing away from each other. They'd actually never seen each other before. Can you just walk me through some of those moments that you've observed over the last several months? Absolutely. Well, the first moment I'd say that struck me was, and I walked into the pick you after their 24-hour surgery, and they were so far apart. The girls had never been that far apart, and so that was just really emotional and wonderful, all in the same, that they were now two separate little girls. A few weeks down the line, one of the girls will hope to, was well enough that she was off her ventilator, and for the first time, we were able to put her in bed with her sister. She had never laid side-by-side with her sister face to face. They snuggled up right away together, and it was just a moment we'd been waiting for for a long time. That's amazing. Kate, can we just rewind here for a moment? How did you first become aware of these twins' case, and can you just kind of walk me through what this process has been like? Yes. and is a long-term partner of world PDF. and so they reached out to us and asked us to help with a set of twins. I had to Google Cranio Pegas because I did not know what that was and helped them bring these girls to the United States to St. Louis, Missouri for care. From there we were connected to their legal guardian in Ethiopia at Lola's children's home. The girls have loving parents, but they live in a very remote area of Ethiopia and because this is so rare and there were so many unknowns, the medical community there wanted them to be in a place where they had one-on-one care as well as some medical personnel that visited them pretty often to make sure that they were okay. So the journey started way back in 2024. Then we just started with all of the logistics of bringing them here. How do you bring kids that can't sit up in an airplane? How do you bring them on a flight? Worked through those logistics. They ended up actually taking out nine seats, three rows and putting in a stretcher on Ethiopian airlines which is pretty incredible. Then we got them to Chicago and then Air Med, Air Ambulance stepped in to bring the girls to St. Louis and then that's where it all began, all the imaging at Cardinal Glenon and really all they had was an X-ray. They did not know much about these girls. And so they had to do a lot of imaging and testing in the very beginning to even find out where the girl's healthy and automatically was the separation possible and happily so it was and we have a very happy ending. We certainly do. It sounds like such a long road to get there too that culminated in this 25-hour surgery which I have to imagine was just extremely stressful for you. Can you walk us through what was going through your mind at that time? Sure. I guess we had practice. They had had six significant surgeries prior to that one that each held risk because they had vascular surgeries staged prior. This though felt different. We knew there was a lot of risk. So that was very hard as I do this as a mom. I also do this as a professional but your emotions creep in and so we just sat together. Their uncle is from Washington DC so he was able to come and we had a few others that we just sat together during the whole the whole surgery knowing they were in the best hands possible and just really hopeful for a positive outcome and yeah the relief we felt when the neurosurgeons and plastic surgeons came out and we received you know several updates throughout the 25-hour period so we felt really good and really positive the whole way but when it was all over we were very very relieved. Yeah I bet a big sigh of relief there. Can we just zoom out here for a moment because this is such an incredibly rare condition. Can you explain a little bit more about this condition? Well I'd like to leave the medical most medical information to the medical team but for a lay person what I've learned is cranial pagus is when the babies are connected at the top of the head. In this case not only were they connected at the top of the head but they were facing different directions. I am told that this happens in about 1 and 2.5 million babies born so it's very rare and then even a lesser number of those children survive. So it's pretty miraculous that this mom not only carried these kids to full term but that the medical community in Ethiopia were able to deliver them two happy healthy little girls. Absolutely Kate a really incredible story thank you so much for explaining it all to us. Absolutely. Alright one more quick break when we come back some bad blood between Travis Kelsey and his former investment advisor one last thing is next. We can also talk about the technical issues of the future. We can also talk about the financial issues of the future and the front end and also about the future. If the shopper had a business partner it would be a big deal. We can also talk about the business partner and we can also talk about the shopper. We can also talk about the shopper's business partner and the shopper's business partner. The business partner is the third year of the year. The first thing that happens is that we can also talk about the technical issues of the future. We can also talk about the financial issues of the future and the front end. We can also talk about the financial issues of the future and the shopper's business partner is the first thing that happens. We can also talk about the financial issues of the future and the shopper's business partner is the third year of the year. And one last thing. It's been a busy year for Travis Kelsey. Rockos coming after my homes and he finds Kelsey. Earlier this week he and the Kansas City Chiefs opened their 2026 season in a game against the Denver Broncos. It's Kelsey's first since he got married to one Taylor Swift in July. It was a fun offseason man. Wedding was the best night of my life. While he's been running plays, it turns out Kelsey also got played recently by the architect of a massive Ponzi scheme. Just after kickoff in that Chiefs Broncos game on Monday, we learned that Sid Harth Jawahar, an investment advisor from Texas, is being sentenced to 11 years in prison. He's the guy who, according to a judge, defrauded investors like Kelsey out of millions of dollars and used that money to really live the life of a showgirl. Lavish vacations, private jet rides, spending sprees, clothing stores, expensive outings at fancy restaurants, exclusive clubs like Zero Bond open their doors to Jawahar saying, "Welcome to New York, it's been waiting for you." In fact, prosecutors say Jawahar took in more than $35 million from clients but only actually invested about 10 million of that. That's a pretty big blank space on the books. "I've got a blank space baby, and I'll write your name." Judge Zachary Bluestone writes that 99% of Jawahar's clients' funds were put into an investment entity called Philip Morris, Pakistan. When PMP's value declined, Jawahar basically told his clients, "Actually we're all good Travis Kelsey, profits are up." But eventually, his problems caught up with him, and not the champagne kind. Jawahar pleaded guilty back in January to three counts of wire fraud in connection with this scheme. In addition to his 11-year sentence, he's also on the hook for more than $31 million in restitution. How's that for Karma? Now Jawahar's attorney tells ABC News, "Sid Jawahar is a very good man who's made some very serious mistakes and is taking ownership of it all. We don't know how much Travis Kelsey lost in the scheme, though he and Swift are likely able to shake it off." Still, dodgy investment opportunities can be damaging, no matter how famous you are. And that's something Travis Kelsey knows, all too well. That's all for this episode of Start Here. For live news anytime, you can catch us on ABC News Live on Hulu, Disney Plus, the ABC News, apps basically anywhere you stream live news. For Brad Milky, I'm Mike Tabaski, and I'll talk to you tomorrow. When setting your makeup, then forgetting it's even theirs. Gel to mist technology locks in your look for up to 24 hours, with flexible all-day comfy grip. Maybe it's Maybelline. See you in the next episode!