Fed Set to Hike Rates Under Warsh Despite Trump Expectations

The Federal Reserve is poised to raise interest rates for the first time under Chairman Kevin Warsh's leadership, despite President Donald Trump's expectations of rate cuts. The Fed will announce its policy decision on Wednesday at 1800 GMT, following a two-day meeting.

Financial markets are betting heavily that policymakers will lift their benchmark rate by a quarter of a percentage point to a 3.75-4 per cent range and signal further tightening ahead. Such a decision would put Warsh in a tight spot, as Trump picked him with the expectation of rate cuts.

The economy is facing elevated inflation, $100-a-barrel oil, and signs that underlying inflation is not moving towards the Fed's 2 per cent goal clearly or quickly enough. US consumer price inflation, excluding energy and food, rose 0.3 per cent last month from the previous month, far more than consistent with inflation at the Fed's target.

Economists project a rate hike on Wednesday, although some think it's a close call. JPMorgan economist Michael Feroli believes the Fed will raise rates, while Scotiabank economist Derek Holt thinks raising rates now is the wrong move but expects it to happen regardless of Warsh's concerns about inflation intolerance.