Fed Hike Test Looms Large for Warsh's Credibility

The Federal Reserve is set to meet this week and decide whether to raise interest rates, which would be its first hike in roughly three years. The decision is crucial for Kevin Warsh's credibility as Fed Chair, especially since he has emphasized the importance of restoring price stability.

Inflation remains a concern, with August consumer inflation holding steady at 3.4% year-on-year, still above the central bank's 2% target. Markets expect a rate hike, assigning an over 85% probability to it, but the decision is not guaranteed.

The White House has expressed opposition to a rate increase, with President Donald Trump arguing that the US should have the lowest borrowing costs in the world. However, investors are focused on inflation and believe that higher rates are necessary to combat persistent price pressures.