Fed Defies Trump, Prepares Rate Hike as Inflation Remains High

The Federal Reserve is expected to raise its benchmark rate for the first time in three years on Wednesday, despite President Donald Trump's demand for a cut. The move would be aimed at fighting stubbornly high inflation, which has been driven by a surge in oil and gas prices due to the ongoing Iran war. Fed Chair Kevin Warsh has argued that the central bank had not yet achieved its goal of putting inflation in check.

Analysts and economists expect a quarter-point increase in the Fed's rate, currently about 3.6%, but there is some uncertainty surrounding the decision. The Fed's potential rate hike comes just seven weeks before the midterm elections, where high prices and affordability have taken key roles. Trump has repeatedly attacked Warsh's predecessor, Jerome Powell, in harshly personal terms.

Some experts warn that a rate increase could throw another sharp shift into a volatile period for the economy and financial markets. Kristin Forbes, an economist at MIT's Sloan School, said she doesn't see an end to the war in Iran right now, which would likely keep inflation higher than the Fed's 2% target for even longer.