Fed Defies Trump, Expected to Raise Rates Amid Inflation Concerns

The US Federal Reserve is expected to raise its benchmark interest rate for the first time in three years on Wednesday, despite President Donald Trump's demands for a cut. The hike would be aimed at fighting stubbornly high inflation, which has been driven up by factors such as the Iran war and surging investment in AI data centers.

A quarter-point increase in the Fed's rate, currently about 3.6 per cent, is widely anticipated, with traders seeing a 90 per cent chance of a hike according to futures prices. The move would put the central bank at odds with Trump, who has repeatedly attacked the Fed and its chair, Kevin Warsh.

Warsh has argued that the Fed had not yet achieved its goal of putting inflation in check, and recent inflation reports have shown that prices remain stubbornly high. Economists such as Kristin Forbes expect that a rate hike is necessary to prevent persistent inflation, despite concerns about the impact on the economy.