Fed on the Brink: Trump-Appointed Chair Faces Inflation Test

The US Federal Reserve is set to meet this week amidst expectations of a rate hike to combat high inflation. The Fed has held interest rates steady since January, but several policymakers have hinted that they will act if inflation doesn't slow down.

Consumer inflation for August remained steady at 3.4%, still above the Fed's target of 2%. Market expectations of a 25-basis-point rate hike on Wednesday surged to over 85% after the data release, according to CME's FedWatch tool.

President Trump has criticized the Fed's independence and demanded lower rates to spur economic activity. Fed Chair Kevin Warsh, appointed by Trump, is facing his first real test as he decides whether to raise rates or hold steady.

Analysts warn that raising interest rates would increase borrowing costs, acting as a brake on investment and consumption. However, failing to act could also have consequences, with some arguing that the Fed's credibility is at stake.