Fed Defies Trump, Prepares to Raise Rates Amid Inflation Fears

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 decision would put the central bank at odds with the president's stance on monetary policy.

Fed Chair Kevin Warsh argued that the Fed has not yet achieved its goal of putting inflation in check, and most analysts and economists expect a hike after his speech at the Fed's annual conference in Jackson Hole. A rate increase would be a sharp shift for the economy and financial markets, which have been volatile lately.

The move comes as the US is facing high inflation, driven in part by surging investment in AI data centers, and rising oil prices due to tensions with Iran. Kristin Forbes, an economist at MIT's Sloan School, said that the risks are more on persistent inflation than falling quickly, making a rate hike necessary.