Fed Likely to Hike Rates as Trump Pressure Fades

Federal Reserve Chair Kevin Warsh is facing pressure from President Donald Trump to keep interest rates low, but economists expect him to side with financial markets and raise rates on Wednesday. This would be the first rate hike in three years, pushing the Fed's benchmark rate to about 3.9%. The move comes after a high-profile speech by Warsh last month warning that inflation remains too far above the Fed's 2% target.

Warsh has been criticized for his tough rhetoric on inflation, which some see as contradictory to his decision not to raise rates in July. However, economists argue that he has largely boxed himself into a rate hike due to strong market expectations and stubbornly high inflation numbers.

The Fed's key rate has remained unchanged since the Iran war sharply raised gas prices, lifting inflation to 3.7% in July. Core inflation, which excludes food and energy categories, was 3.3% in July, up from 3% just before the war.